In the aftermath of the General Election, Chancellor Rachel Reeves has formalised the creation of the National Wealth Fund (NWF) – a crucial pledge in the Labour Party manifesto designed to boost the UK’s infrastructure.

Through a combination of public and private funding, the Fund aims to incentivise and facilitate investment by the private sector in national projects. The Fund is set to target high-growth sectors and those which advance the country’s sustainability objectives, including ports, gigafactories, clean steel and hydrogen, and carbon capture.

The policy has involved investors and business owners from its inception, with the Government advised by experts including Barclays CEO, CS Venkatakrishnan, and a former Governor of the Bank of England.

In industry, major operators and innovators have lauded the measure as a major driver of development in key sectors – but SMEs have expressed concerns over whether the NWF will benefit them and help them to grow and succeed.

Helping SMEs grow

We recognise that SMEs and their capacity for flexibility and innovation play a key role in overall economic growth and technological advancement. Throughout its manifesto, the Government has expressed an understanding of this as well.

In order for the Fund to optimise its success and achieve its objectives, it will need to be accessible (in the form of investment) to SMEs and regional businesses around the UK, for investment in, for example:

• Capital, such as machinery
• Specialist staff
• Large-scale manufacturing
• Construction contracts.

Additionally, it would need to offer adaptable reporting requirements and benchmarking, if required, in recognition of the scale SMEs work across compared to multinational corporations.

The Fund certainly has the potential to do a lot for SMEs. With the right funding and solid business practices, SMEs generally have greater potential for rapid growth than already large companies and are therefore likely to benefit most obviously and most immediately from investment via the Fund.

What remains to be seen is how SMEs access funding from the NWF.

Accessing funding

The NWF is likely to be managed and administered by the UK Infrastructure Bank and a reformed British Business Bank, with the Treasury providing around £7.3 billion to the Fund in a bid to attract “£3 of private investment for every £1 of public money” – totalling around £21.9 billion of private funding.

The Fund is still in its early days, so it has not yet been confirmed how the Government plans to allocate funding and direct private investment.

However, it has said that it plans to encourage investment by jointly shouldering the risk associated with major infrastructure projects and act as a “concierge” service for investors looking for a stake in such developments.

We expect, then, that SMEs will need to take one of the following routes towards accessing funding:

• Applying directly to one of the managing bodies
• Putting themselves forward as open to investment
• Establishing a reputation as an innovator within a growth sector

Ultimately, private investors will choose where they wish to invest based on a number of factors, primarily the returns they may receive – although the NWF is designed to reduce the narrowing effect that this priority can have on the distribution of investment.

While we can’t yet be sure of the extent to which SMEs will benefit from the National Wealth Fund, it seems likely that this is a genuine push by the Treasury to extend the boon of private investment to independent businesses that will have a positive, if potentially moderate, outcome for SMEs.

For further advice on accessing and benefitting from Government grants and funding, please get in touch with a member of our team today.