Financing mismatches constrain high-growth firms, FPC review shows
Structural frictions in capital allocation are the primary barrier to funding UK high-growth businesses, according to a new Bank of England research series. Deputy Governor Sarah Breeden and Colm Manning launched the initiative ahead of the FPC's 2026 fourth-quarter financial stability review.
Beyond the supply of bank loans
Sarah Breeden and Colm Manning emphasize that financing challenges for expanding companies stem from structural matching issues rather than a simple shortfall of capital.
While challenger banks and non-bank lenders have diversified funding sources since the financial crisis, high-growth firms reliant on intangible assets still face distinct barriers.
Bank research shows that lower returns on SME lending are driven by higher operating costs and loan impairment rates rather than regulatory capital requirements.
Furthermore, digital lending partnerships expand credit and lower borrowing costs in rural areas, but the advantages remain concentrated among lower-risk corporate borrowers.
Mapping capital to long-term risk
The Bank of England is examining whether governance constraints, ticket-size mismatches and fragmented public coordination impede the deployment of long-term institutional capital.
As market-based finance expands, the Financial Policy Committee is evaluating how risks transmit between banks and non-bank financial intermediaries.
The Bank will host an industry conference later in 2026 before publishing full findings in the fourth-quarter Financial Stability Report.
A test of regulatory will
Targeting capital matching rather than demanding looser bank capital rules is the correct analytical path.
Yet diagnosing familiar friction points achieves little without concrete regulatory remedies for institutional funds.
The FPC must now deliver tangible policy measures rather than another purely descriptive review.