John Healey, the chancellor, will channel £20.4bn through state policy lenders over five years in the Budget to stimulate commercial borrowing and crowd in private capital.
The capital allocation provides £15.4bn for the National Wealth Fund and £5bn for the British Business Bank. State lenders will direct up to £5bn into defence, dual-use technology and sovereign manufacturing over four years, co-investing alongside institutional funds into growth-stage British companies.
Routing public borrowing through state investment vehicles allows the Treasury to finance industrial expansion while managing fiscal rules. Alongside the funding drive, the chancellor confirmed that Business Asset Disposal Relief will drop from £1m to £500,000, while the bank corporation tax surcharge will rise three percentage points for 15 months from January.
SMEs face mixed overhead adjustments, including an increase in the small business rates relief threshold from £12,000 to £18,000 for retail, leisure and hospitality premises. Mayors will receive 20% of regional business rates from next year, moving to 100% local retention by 2030, with powers to levy overnight tourist taxes from 2028.
The financing strategy arrives alongside updated Office for Budget Responsibility projections, which forecast economic growth of 1.2% this year before slowing to 1% in 2027.
Healey said: "I will work with pension providers, asset managers and the wider industry to accelerate more private investment into Britain’s innovative, fast-growth firms."
He added: "Providing support for British families and businesses has meant raising some tax to meet my commitment to fiscal discipline. I’ve done this in a balanced way, protecting the incentives for business investment and the incentives and income from work."
