British Business Bank told to refocus lending on government’s priority sectors

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Ministers are to refocus lending by the British Business Bank on small companies operating in high growth sectors, in an attempt to put financial muscle behind the government’s new industrial strategy.

The BBB, the government’s economic development bank, has been told to target the eight sectors identified in the industrial strategy, as chancellor Rachel Reeves seeks to stimulate economic growth.

Officials briefed on the plan highlighted a speech by culture secretary Lisa Nandy last month in which she announced that the BBB, which supports more than £17bn in finance for smaller businesses, would increase its backing for creative industries.

The creative sector is one of eight high growth industries covered by the industrial strategy alongside advanced manufacturing, clean energy, defence, digital and technology, financial services, life sciences and professional and business services.

Nandy said the BBB was “committing to increase the scale of its support for the creative industries” and that the bank would “report to us on its investment in the creative industries, so that we know the real world impact it is having”.

One official briefed on the nascent industrial strategy, which is due to be published in June, said: “You can read across from what Lisa Nandy said to other sectors in the industrial strategy and what we want the BBB to do.”

Although the BBB would continue to fund promising small companies in sectors not covered by the industrial strategy, ministers want its financial firepower to be focused on those areas deemed to represent the future of the UK economy.

A report published last month by the Centre for Cities think-tank urged the government to focus on areas with clusters of companies that export in high-value sectors, such as AI, advanced materials, fintech or life sciences.

The BBB was set up in 2014 under the Conservative-Liberal Democrat coalition government with a mission to drive sustainable growth and to help smaller businesses access finance. Its core programmes support more than £17.4bn of finance to almost 64,000 smaller businesses.

The government is a 100 per cent shareholder in the bank and ministers have to sign off its business plan, but the BBB is operationally free to decide which businesses to support.

The British Business Bank said: “We are pleased to support the aims of the government’s industrial strategy through our programmes, which support greater investment and lending in high-growth sectors with potential for innovation such as life sciences, clean energy, creative industries, financial services, and digital and technology.”

Reeves is planning to roll out plans for individual sectors before the industrial strategy is formally published. “We can’t wait until June,” she told colleagues. Earlier this month she met bank bosses to discuss a strategy for financial services.