In her Mansion House speech this week, Chancellor Rachel Reeves confirmed a significant expansion to the Growth Guarantee Scheme (GGS).
It may not be a household name. But the scheme – which provides a 70% government guarantee on commercial loans, helping to unlock finance for businesses that banks would otherwise not have been able to lend – has quietly delivered over £3.7 billion of financing to UK SMEs since its launch in 2022.
For example, the Growth Guarantee Scheme enabled Allica Bank to support Hampshire-based vehicle service and repair business The Workshop with its acquisition of a neighbouring business. By combining forces, the business was then able to modernise its systems, expand, and introduce apprenticeships to help train the next generation of automotive engineers in the area. This is just one story of many.
The extension of the scheme will see its annual capacity more than double, from £1.35 billion to £3.35 billion by 2028/29, and the maximum loan term extended from six years to ten, helping an additional 12,000 businesses each year.
This is genuinely great news and comes after Allica has spent over a year making the case that the scheme can do more to support established SMEs and power growth right across the UK.
But it lands at an interesting political moment, and these changes should be the start of a serious conversation about role of the UK’s established SMEs in supporting growth, not the end of the story.
Why the timing is important
As Andy Burnham prepares to take on the role of Prime Minister, he has set out his own test for growth policy. In his first big speech in Manchester last month, he argued growth cannot be ordered from the top down and must come from the bottom up, and reaching every postcode, not just London and the South East.
It might not be a coincidence then that the Chancellor's GGS expansion, announced as part of her Mansion House speech, is designed to deliver exactly that.
The vast majority of lending supported by the GGS goes to businesses located outside London and the South East, so a bigger and more flexible scheme means more finance reaching the businesses that keep regional economies moving.
At Allica, we feel passionately that this cannot be a one-off. It must be the start of a wider debate about who and what actually drives growth across the UK.
The businesses missing from the policy conversation
Historically, the growth agenda has tended to focus on the two extreme ends of the economy.
Government attention goes to large corporates on one side, and to the micro-SME population on the other, helping keep the big investment wheels turning and the micro-businesses afloat.
Established SMEs – firms with between 5 and 250 employees – get missed in between. There are around half a million of these businesses in the UK, supporting over 10 million jobs and generating a third of the UK’s GDP and employment.
Their impact grows when you look outside the capital. Established SMEs account for 38% of private sector employment in the North East, rising to 39% in Scotland and 44% in Wales. Once you are more than 25 miles from a metropolitan centre, they support around one in every two local jobs.
How established businesses have been left behind
In April 2025, Allica published research, Rebooting SME Finance to Unlock Growth, which found a lending gap of up to £65 billion had built up in the SME credit market over the previous 25 years.
The shortfall was especially prominent in the type of productive credit that boosts investment, productivity and growth. The research also tracked the collapse in SME overdraft lending, down from £18 billion in 2000 to just £2.7 billion in 2024, and showed the UK trailing the rest of the G7 on business investment, with small businesses investing at only a third of the level of large corporates.
This research gave Allica the case it needed to start pushing harder for change. We began calling on the government to expand the GGS by three to four times to bring it in line with equivalent schemes in the US, Germany and Spain, and to work with the Bank of England to review the prudential framework with a stronger focus on SMEs.
Taking the case to the top
Our CEO, Richard Davies, has spent the past year taking the case for an expanded GGS to Parliament and to the Government, arguing for a significant annual capacity increase and a new 'Scale-up Guarantee' to support high-growth businesses that lack the tangible assets traditional lenders want to see.
While further enhancements to the scheme, including allowing for larger facility sizes, could mean it can do even more, we’re incredibly proud that so much of what we asked for has landed. The changes to loan term and eligibility match the case we made directly to the Treasury, and will make a huge difference to thousands of businesses.
What we will keep pushing for
We welcome the GGS expansion as a sign that government is willing to act on the evidence, but one scheme is not enough. If the next government wants to reach parts of the country that growth policy has missed for decades and generate jobs nationwide, established SMEs have to be central to that plan.
At Allica, we’ll keep making that case for the Scale-Up Guarantee and addressing the wider SME finance gap. But most crucially, we’ll continue to champion the role established businesses can play in delivering growth that actually reaches every postcode. A successful Growth Guarantee Scheme is just the start.
