UK Finance Responds to FCA Call for Input: Unlocking Regulatory Barriers to SME Lending
Credit: Leasing Life
The industry's assessment of what is preventing more credit from flowing to small and medium-sized businesses and what the FCA can do about it.
Context:
On 18 March 2026, the FCA published a Call for Input seeking views on how its regulatory framework can better support small and medium-sized enterprises (SMEs) in accessing finance. SMEs are critical to the UK economy: at the start of 2025, they accounted for 60% of private sector employment and 50% of turnover. The FCA's stated motivation is its strategic priority of supporting growth, and the evidence that UK SME demand for finance is notably low by international standards, despite an apparently adequate supply.
UK Finance submitted a formal response ahead of the 17 April 2026 deadline, drawing on its members' direct experience as lenders, brokers, and finance providers to SMEs across debt, equity, hybrid, and alternative finance products. The response was designed to inform the FCA's roundtable with key stakeholders in May 2026, after which the regulator will publish a summary of insights and next steps.
The Call for Input sits alongside HMT's joint initiative with the Bank of England on access to finance for high-potential-growth firms, DBT's demand and supply-side analysis, and the FCA's open finance roadmap, which specifically identifies improving SME credit access as a near-term use case priority for the PRISM Taskforce established in 2026.
Rules and Guidelines:
The Call for Input is not a consultation on new rules; it is evidence-gathering that will inform future regulatory action. The FCA is exploring whether regulatory barriers directly affect the cost and perceived risk of providing SME finance; whether opportunities exist to better support provision through industry collaboration, innovation, and technology; and whether sector-specific issues in high-growth sectors (advanced manufacturing, clean energy, creative industries, defence, digital and technologies, financial services, life sciences, and professional services) warrant targeted regulatory adjustments.
UK Finance's response focused on three regulatory areas where existing rules create friction in SME lending. First, the credit information framework specifically, whether the Consumer Credit Act 1974's definitions and the FCA's credit broking perimeter create barriers to open finance use cases for SME lending that do not exist for retail consumers. Second, risk appetite and capital while not within the FCA's direct remit, UK Finance pressed for a coordinated response with the PRA on how Basel 3.1 SME-supporting factors interact with new lending models. Third, proportionality in financial promotions, UK Finance argued that the current financial promotions rules create a compliance burden disproportionate to harm in the SME lending sector, particularly for B2B offerings.
On technology and innovation: UK Finance endorsed the FCA's open finance roadmap and pressed for the PRISM Taskforce to prioritise the SME credit use case, including exploring how account transaction data, open banking payment data, and VAT return data could be combined to give lenders richer SME creditworthiness assessments at lower cost and higher speed.
Businesses Affected:
Banks, building societies, challenger banks, and alternative lenders provide credit, working capital, and investment finance to UK SMEs.
Fintechs and open banking providers are developing data-driven SME credit assessment tools that stand to benefit most from any regulatory clarification on data use in lending.
Commercial finance brokers and intermediaries facing financial promotions proportionality challenges and benefit from a cleaner regulatory perimeter.
Private equity and venture capital providers to high-growth SMEs affected by AIFM rules are being reviewed as part of the FCA's 2026/27 work programme.
Next Steps:
Engage with the FCA's May 2026 stakeholder roundtable, UK Finance and other trade bodies will be present, but lenders with specific market intelligence on regulatory barriers should make direct representations.
Review financial promotions compliance processes for SME lending products. If current obligations are disproportionate relative to harm, document this with evidence for FCA engagement.
Assess open banking and open finance data integration capability now. Lenders that are operationally ready to use richer SME data when regulatory frameworks permit will capture first-mover advantage.
Monitor the FCA's later-2026 summary of insights and next steps which may include proposals for targeted rule changes or industry-led initiatives that could materially change the economics of SME lending.
Source | UK Finance | SME Access to Finance
