To understand how the SME funding landscape might change after the UK general election on 4 July, we’ve searched through the seven main parties’ manifestos.

What we discovered were proposals to address the regional inequality in uptake of SME financing. These include establishing new, local mutual banks and making changes to the British Business Bank. On the left, there are proposals to finance SMEs through local, co-operative ownership models.

There is support for improving and enforcing invoice payment terms for SMEs and unlocking funding for SMEs involved in green initiatives.

Whatever the outcome from the polls on 4 July, here are the details of what to expect from the Conservatives, Labour, Liberal Democrats, Greens, SNP, Plaid Cymru, and Reform.

Localising access to SME funding through new local banks

The Conservatives and Greens support the establishment of regional mutual banks. These banks would be responsible for providing finance to local SMEs.

In the Greens’ manifesto, they say they will back regional mutual investment banks to drive investment in SMEs involved in decarbonisation and local sustainability.

The Liberal Democrats want to work with the major banks to create a local banking sector dedicated to meeting the needs of SMEs.

Plaid Cymru want to develop a community bank to provide local banking services in Wales, but we can’t tell from their manifesto whether this would be personal banking only or also include business banking and lending.

The SNP does not call out SMEs in their manifesto, but campaign generally on further devolution and economic autonomy.

Labour are proposing to localise SME funding through the existing British Business Bank, rather than through new establishments (see below).

Reform UK do not mention localising SME funding in its manifesto.

Localising access to SME funding through the British Business Bank and Development Bank of Wales

Labour and the Liberal Democrats want reform of the British Business Bank to ensure SMEs in the regions have better access to capital. The Liberal Democrats specifically call out funding zero-carbon products and technologies through this reform.

In Wales, Plaid Cymru want to reform the Development Bank of Wales to invest more in emerging businesses and invest their profits in local infrastructure profits.

The Conservatives, SNP, and Reform do not mention working with the British Business Bank to localise SME access to finance.

Funding through co-operative and mutual models of ownership

As an alternative to SMEs giving away equity to private sector investors in exchange for funding, the Greens, Plaid Cymru, and Labour are looking instead at promoting co-operative or mutual models of ownership.

While Labour do not suggest this change should prioritise any SME sector above another, both Plaid Cymru and the Greens hope to focus this work on green initiatives and the transition to a zero-carbon economy. In addition, Plaid Cymru want to prioritise local services that are failing to source finance from the private sector.

The Greens also want to explore legal ways for SMEs to be transformed into mutual organisations, especially at the point of succession from one owner to another.

We were unable to find reference to co-operatives or mutuals in the SNP and Reform manifestos.

Banking regulations to incentivise lending to SMEs

In their manifesto, the Conservatives say they will stop upcoming banking regulation Basel 3.1 from deterring banks from lending to SMEs. This is in line with what the Treasury Committee recommended in their report into SME Finance. At the time, the Treasury Committee comprised of five Conservative MPs, four Labour, and one SNP.

Under the early proposals for Basel 3.1, the amount of capital reserve that regulated banks must hold when lending to SMEs would rise from 76% to 85%. This burden could make banks less likely to finance SMEs and/or increase their cost to SMEs.

While no other parties mention Basel 3.1 specifically, more generally the Liberal Democrats want to require the Financial Conduct Authority and Prudential Regulation Authority to ensure financial inclusion. While their manifesto examples focus on consumer finance, they do not rule out business finance.

Labour say they will ensure a pro-innovation regulatory framework but do not give further details.

Reform want to scrap all EU regulations the UK retained after Brexit. In financial services, divergence in policy, including adaptations to Basel 3.1, is already taking place.

We were unable to find reference to any banking regulation changes in the Plaid Cymru, SNP, and Green Party manifestos.

Faster invoice payments to free up cashflow

We wanted to mention the parties’ promises on late invoice payments because we regularly encounter SMEs owners in distress due to lack of cash flow. The Conservatives, Labour, Liberal Democrats, and Greens all promise to tackle late invoice payments.

Apart from Labour, they plan to do this by using The Prompt Payment Code. Currently, businesses can voluntarily sign up to the code, in which they promise to pay >95% of all their invoices from small businesses (<50 employees) within 30 days and >95% of all other invoices within 60 days. Failing to meet these requirements results in loss of their Prompt Payment certification and makes it harder for them to win public contracts.

The Conservatives say they will improve enforcement of the code and promote digital invoicing.

The Liberal Democrats will require all government agencies, government contractors, and companies with >250 employees to sign up to the Prompt Payment Code.

The Greens want to make the Prompt Payment Code law and prevent late payers from being able to enter the procurement process for public contracts. Additionally, they would mandate that potential instances of poor payment are investigated proactively, instead of only when a complaint has been made.

Labour say they will take action on late payments, without providing details or reference to the Code.

We were unable to find reference to reducing late invoice payments in the SNP, Plaid Cymru, and Reform manifestos.

Final thoughts

With nearly 5.5 million SMEs in the UK employing 16.7 million people and turning over £2.4 trillion, improving funding for SMEs could have been an important campaign topic ahead of the polls opening on 4 July. Instead, the main issues have been betting scandals and immigration.

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