Financing 'good growth in every postcode'

Andy Burnham and John Healey have promised good growth in every postcode across the UK - a laudable ambition which is going to require serious investment. It also requires something that has been receiving far less attention: a financial system capable of channeling that investment to the places markets often overlook.

With fiscal rules constraining public spending, private finance has an essential role to play - but market forces will not deliver shared prosperity. There will always be towns that are overlooked, sectors judged too risky, and people who don't appear profitable enough.

If we want finance to reach the places that need it most - to help communities thrive, reindustrialise the economy, transform our energy system and rebuild vital infrastructure - then we need financial institutions that understand local economies, or that can work alongside those that do. 

The UK already has institutions capable of playing this role - at national, regional and local levels. The challenge is that, almost without exception, they are operating far below the scale required.

At the national level, public finance institutions such as the National Wealth Fund (NWF) have the potential to be transformative. The NWF’s dual mission - supporting regional growth while accelerating the transition to a thriving low-carbon economy - means that it is perfectly placed to direct and expand investment in line with the government’s priorities. Working alongside business, local authorities and institutions such as GB Energy, it can crowd in private capital while also investing in sectors and places that remain too risky or too immature for private finance.

Yet the Fund remains small. Under current plans it will invest around £5 billion a year over the next five years^[i]. By comparison, Germany's public investment bank, KfW, lent €62 billion (£53.5 billion) to households, businesses and municipalities in 2025 alone^[ii]. 

With the right powers and backing, the NWF could be expected to grow to a similar scale over time. Trade unions, think tanks and campaign groups have been adding their voices to calls for the NWF to be allowed to raise finance through the bond markets^[iii] - initially backed by the Treasury and, over time, by leveraging the Fund's own capital. This would allow it to expand significantly without affecting the Chancellor's fiscal rules. In the short term, the government could double the Fund's annual investment target from £4 billion to £8 billion^[iv]. Because every pound invested by the Fund attracts substantial private co-investment, that could increase total NWF-backed annual investment from around £16 billion to £32 billion.

We can easily imagine the kind of impact that a fund of this size could achieve. It could partner with GB Energy to retrofit buildings across the country, bringing down energy bills for households and businesses. It could launch a targeted investment programme to bring new green industries, skilled jobs and private investment back to communities hardest hit by deindustrialisation. It could take ownership stakes in infrastructure projects, ensuring the public has more control and shares in the financial returns.

The National Wealth Fund is already demonstrating the difference it can make. In recent months, it has backed a £500m programme to retrofit UK universities and a £1.35bn programme to upgrade the power grid. It has invested £250m in EV charging rollout, and £500m in Greater Manchester’s Good Growth Fund. The next step is to give it the scale to do this consistently across the country - and to make sure it has partners in place who can be the link between the national and the regional.

That is why renewed interest in regional banks - another part of the financial system which is under-developed in the UK compared to other countries - is so welcome. These banks could be established as regional mutuals, meaning that, like building societies and credit unions, they would be owned by their members or customers, rather than by the government, and they could be capitalised by the National Wealth Fund. This would bring together the scale of the NWF with the local knowledge and insight of place-based lenders. It would not impact the government’s fiscal rules, but it would drive up investment in every region. Incidentally, it would also provide a boost to the government’s existing commitment to doubling the size of the cooperatives and mutuals sector - an ambition which must surely be an even greater government priority now there are more Co-operative Party members in the Cabinet than ever before, including the Prime Minister. 

Yet even regional banks cannot reach every business or household that mainstream finance has left behind. Some communities require institutions with deeper local roots and closer relationships with the people they serve. If good growth is to reach every postcode, the UK's financial architecture must include not only national and regional institutions, but community-based lenders as well.

Across the UK, millions of people and thousands of small- and medium-sized businesses are excluded from affordable credit, forcing many into high-cost or illegal lending and holding back economic growth. Women, people of colour, people on low-incomes and people in more economically disadvantaged regions are all disproportionately likely to be impacted. 

Community-based lenders - such as credit unions and Community Development Finance Institutions (CDFIs) - play a critical role in providing ethical, affordable credit to those who have been excluded by mainstream finance. But the sector remains small. Ireland has almost three times as many credit union members as the UK, despite having a population 12 times smaller. In the USA, more than 142 million people are members of a credit union - over 42% of the total population^[v].

A central reason for the success of the USA’s community-finance sector is the Community Reinvestment Act - a longstanding piece of legislation which has catalysed partnerships between mainstream banks and community lenders, increasing access to affordable credit and other financial services for millions of people and small businesses across the country. 

Inspired by this, 29 backbench Labour MPs – including Gareth Thomas, a former Business Minister, and the former Shadow Chancellor, Anneliese Dodds - recently wrote to the Chancellor calling for the UK to pass a Fair Banking Act^[vi]. This would require regulators to assess how well banks serve small businesses and financially excluded communities. Banks could improve their ratings either by expanding affordable lending themselves or by partnering with credit unions and Community Development Finance Institutions (CDFIs), helping that sector to expand to meet the need and demand for ethical, affordable lending in communities across the country^[vii]. 

Legislation such as this would demonstrate that the government fully recognises the critical importance of community-based lenders - and would stand in contrast to some of the signals implied by government policy over the past year. 

The Financial Services Growth & Competitiveness Strategy - published last summer - had nothing to say about strengthening community finance or broadening access to credit or investment. The subsequent Financial Inclusion Strategy contained welcome measures but was widely criticised for being too limited in its scope and ambition. A recent Treasury Select Committee report rather witheringly noted that “the Strategy does not show who is excluded, where exclusion is concentrated, which products and services people are excluded from, and why”^[viii]. Legislation to reform financial regulation (the Financial Services and Markets Bill) is currently moving through parliament. Its aim is to strengthen and expand our financial sector. But it also represents a critical opportunity to rebalance the system and align it with the needs of our communities, our economy and our planet, including through measures to strengthen purpose-driven financial institutions.   

Britain does not need to build an entirely new financial system from scratch. The institutions capable of delivering investment where it is needed most already exist. The National Wealth Fund can provide scale, regional banks can bring local economic expertise, and community lenders can reach the people and businesses that larger institutions cannot. Together, they form the financial ecosystem needed to deliver investment across the country. The task for the government is to create the conditions which allow them to succeed together.

Nick Bryer is Director of Programmes and Campaigns at the Finance Innovation Lab.

[i] KfW, ‘Financial Report 2025: Enabling Growth’: www.kfw.de, 26 March 2026.

[ii] Ibid.

[iii] Finance Innovation Lab, ‘Joint Statement: CSOs and Unions Call on Government Scale-up the National Wealth Fund’: www.financeinnovationlab.org, 21 September 2026.

[iv] Finance Innovation Lab, ‘Briefing: Scale Up the National Wealth Fund’: www.financeinnovationlab.org, 9 June 2026.

[v] World Council of Credit Unions, ‘Statistical Report’: www.woccu.org.

[vi] Kay Polley, ‘MPs Urge the Chancellor to Back a Fair Banking Act for Growth in Every Postcode’: www.financeinnovationlab.org, 8 September 2026.

[vii] Finance Innovation Lab, ‘Fair Banking for All Briefing’: www.financeinnovationlab.org, 25 September 2025.

[viii] House of Commons Treasury Committee, ‘Financial Inclusion Strategy’: www.parliament.uk, 14 July 2026.