British businesses could gain access to up to £80 billion in additional financing under sweeping government reforms designed to modernise the UK’s banking system and stimulate investment
across the economy.
The Treasury has unveiled plans to overhaul the bank ring-fencing regime, promising a more flexible and streamlined framework that would reduce duplication within banks while preserving safeguards for depositors and financial stability.
Central to the reforms is a proposed “Growth Allowance”, which would permit major banks to deploy a limited share of their balance sheets more freely. Ministers say the move could release billions of pounds in fresh lending and investment capacity for UK firms, supporting expansion, innovation and job creation.
The reforms would also hand greater authority to the Prudential Regulation Authority (PRA), allowing regulators to update and tailor rules more quickly as the financial sector evolves. Officials argue this approach would replace rigid legislative requirements with a more responsive regulatory system capable of removing outdated restrictions and adapting to wider banking reforms.
The government said the measures are intended to remove unnecessary barriers that have limited lending and investment while ensuring the banking sector remains resilient.
The proposals, developed alongside the Bank of England, are outlined in a report titled *Safeguarding Stability, Enabling Growth*. They are expected to be introduced through the forthcoming Enhancing Financial Services Bill and will form a key part of the government’s wider Financial Services Growth and Competitiveness Strategy.
Economic Secretary to the Treasury and City Minister Rachel Blake said the reforms were aimed at ensuring finance reaches businesses more effectively.
“Where financial systems are inefficient, we will change them,” she said. “These reforms will ensure more financing flows into UK businesses, and we can support growth and create jobs across the country.”
She added that the measures would help “unlock finance for growth while keeping the UK banking system resilient, competitive and fit for the future”.
Alex Depledge, the Chancellor’s entrepreneurship adviser, described the changes as a significant boost for scaling businesses.
“Too often, our fastest-growing firms hit a wall of unnecessary friction just as they start to scale,” she said. “These changes will unlock more of the capital founders need to keep building in the UK, while maintaining the financial stability that underpins investor confidence.”
Ring-fencing was introduced after the 2008 financial crisis to separate everyday retail banking services from higher-risk investment banking operations. The rules were designed to shield consumers and small businesses from shocks in global financial markets by protecting retail deposits and ensuring continuity of essential banking services.
Under the proposed reforms, ring-fenced banks would also gain the ability to offer a wider range of products and services to growing companies, including improved hedging tools and broader access to schemes delivered through public financial institutions such as the British Business Bank and the National Wealth Fund.
Ministers stressed that core protections would remain intact, with ring-fenced banks continuing to operate separately from investment banking activities. The government has pledged to consult on the detailed implementation of the reforms to ensure depositor safeguards are maintained while maximising support for economic growth.
The Treasury also said it would conduct regular reviews of thresholds and reporting requirements to ensure the regime remains proportionate as the financial sector changes. Photo by Diliff, Wikimedia commons.
