UK Finance calls for RLS replacement
UK Finance has called for a new business lending scheme to replace the Recovery Loan Scheme (RLS) which is currently in its third iteration.
Ahead of the upcoming Spring Budget, the trade body has called on the Chancellor to wind down the RLS and replace it with a new Growth Loan Scheme, to support small- and medium-sized enterprises (SMEs) as they seek to invest and grow.
The RLS is set to come to an end in June 2024.
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“For many SMEs, access to support such as tax incentives and the outgoing RLS are critical to business success,” said a UK Finance representative.
“However, many businesses either report that accessing these services can be time consuming with unpredictable outcomes or – in the case of the RLS – expire without a successor scheme in place.
“The government should review its support for SMEs to ensure it is having the intended impact.”
UK Finance added that MREL regulations should also be reformed in order to unlock new investments to support small business lending. MREL regulations set a minimum amount of equity and subordinated debt that a firm must maintain to support its operations.
“Banks and lenders have the capacity and willingness to support UK SMEs in accessing finance,” added UK Finance.
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“Our most recent figures showed £65bn of gross lending to SMEs in 2022, the highest since comparable records began in 2012 (except 2020 owing to Covid), and credit to SMEs continues to flow at around £5bn gross per month.
“However, excessive capital requirements directly reduce bank lending and contribute to UK investment rates being much lower than the OECD average, which presents a barrier to the growth ambitions we all share. These requirements have the greatest impact on smaller banks, non-bank lenders and fintechs, who spur competition and lend to SMEs and businesses outside London.”
Ahead of the Spring Budget, UK Finance has also launched a campaign to boost public interest in capital markets, and has backed the issuance of a digital gilt to “accelerate the digital transformation of the UK’s markets”.
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