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One of the first big announcements made by the new chancellor, Rachel Reeves, was the introduction of a National Wealth Fund (NWF). This is a new public/private investment project intended to boost investment in critical national infrastructure projects like ports, gigafactories and hydrogen and steel projects. In doing so, the aim is to create a more stable economy, which is good news for SMEs. If the wider economy is more stable there will likely be easier access to growth funding and new commercial investment opportunities.
The NWF was one of Labour’s key manifesto pledges and has been co-developed with a high-profile taskforce of business leaders. These include the Aviva chief executive, Amanda Blanc, Barclays chief executive, CS Venkatakrishnan, and the former Bank of England governor Mark Carney.
Some countries, like Norway and Saudi Arabia, have national wealth funds that manage cash generated by the government through state-owned natural resources or through trade surpluses. The UK’s NWF will operate slightly differently and is intended to build new investor confidence, because the government is proposing a shared risk strategy for new national infrastructure and green industry projects. The aim is to attract £3 of private capital for every £1 generated through public funding, potentially resulting in total investment of around £29 billion.
The NWF will initially be financed with £7.3 billion that has been allocated through the UK Infrastructure Bank and this will be supplemented with new private sector investment. The fund will invest in key infrastructure projects, including ports, gigafactories for electric vehicles, clean steel production, carbon capture, and green hydrogen initiatives. Specific sums of money have already been allocated for individual developments and these include £1.8 billion for harbour projects, £1.5 billion for gigafactories, £2.5 billion for sustainable steel projects, £1 billion for carbon capture projects, and £500 million for green hydrogen projects.
By focusing on improving transportation networks, digital infrastructure, and energy supply, it is hoped that SMEs will also benefit. The improved national infrastructure should help to lower operational costs and increase efficiency, which directly benefits SMEs. In addition these projects will generate greater regional wealth and job opporutnities, also beneficial for SMEs.
Four key ways SMEs can benefit from the NWF
The NWF will be a joint initiative between the UK Infrastructure Bank and the British Business Bank. It will be overseen by the UK Infrastructure Bank, led by former HSBC CEO John Flint. Experts are predicting four key benefits for SMEs:
- Easier access to loans and investments which will be especially beneficial for start-ups and high-growth companies;
- Improved national infrastructure can potentially lower operational costs and increase efficiency;
- Greater support for SMEs from the British Business Bank could improve access to finance and growth initiatives;
- A more stable and predictable business environment, facilitating better opportunities for long-term planning and securing investment.
It has been proposed that the management of the NWF will be regionally led, with local partners having the power to shape how investment and development projects are offered, based on local needs.
Although it is early days, the NWF appears to be a positive initiative and should give a welcome boost to UK businesses. We will just have to wait and see how much it will ultimately benefit small business owners.
