FIN.

Treasury publishes SME reviews as part of Budget

As part of the 2024 Budget, HM Treasury has published post-implementation reviews of

  • the Small and Medium Sized Business (Finance Platform) Regulations 2015. These Regulations introduced a Bank Referral Scheme to address a market failure that meant finance providers were not aware of SMEs requiring loans and SMEs were not aware of the options open to them for alternative sources of finance. The scheme required designated banks to refer SMEs whose applications they rejected to platforms that could help them. HM Treasury first reviewed the scheme in 2020 and a second review was due by October 2025, The review was brought forward. The conclusion of this second review is that the scheme has broadly met its objectives, but finance platform conversion rates suggest that only 5% of businesses that are initially rejected for finance end up getting finance through the scheme. Treasury had hoped for better levels and is looking into whether any improvements to the way in which referrals are made could help and
  • the Small and Medium Sized Business (Credit Information) Regulations 2015: these Regulations introduced Commercial Credit Data Sharing, designed to increase competition by lowering the barriers to entry in the SME credit market. The hope was to improve availability of SMEs’ credit data amongst lenders and enable newer lenders more easily to differentiate between high and low risk SME borrowers. The idea was also to improve SME credit scoring and therefore availability and price of credit for them. The Regulations require designated banks (currently 9) to share all their credit data on in-scope SME customers with 4 designated CRAs. At the time the Regulations were brought in, the designated banks comprised the vast majority of the SME lending sector. Like the Bank Referral Scheme, these Regulations are now on their second review, which has been brought forward, not lease because of a recent report that explores how smart data can enhance access to finance for SMEs. The Treasury says the Regulations seem to have significantly enhanced competition in the SME credit market but that technological advances mean there may need to be updates to how the process works to ensure the policy continues to meet its objectives.

Emma Radmore