Finance, growth and productive investment: what is the FPC assessing in 2026?

By Sarah Breeden and Colm Manning.

Economic growth depends on many things: skills, innovation, infrastructure, competition and a stable macroeconomic environment to name a few. Finance is not the whole story. But it can be a critical enabler. 

For firms with the potential to innovate, scale and raise productivity, access to the right finance at the right time can make a profound difference. It can determine whether new ideas become successful businesses, whether investment plans are realised, and whether promising firms can grow into the employers and innovators of the future. When that finance is unavailable, investment may be delayed, expansion constrained and the economy may miss opportunities for innovation and productivity growth. 

This is especially important for high-growth firms. These firms often make an outsized contribution to innovation, productivity and employment growth, yet can often face distinctive financing challenges.

That is why the FPC has been examining how well the UK financial system supports productive investment and high-growth firms. As part of this work, the FPC is assessing whether there are system-wide frictions, whether market developments are helping to address them, and where the financial system could better channel long-term capital towards productive investment without undermining resilience.

Some people see growth and resilience as competing objectives. We do not. A resilient financial system is the foundation on which sustainable growth is built. Businesses are more willing to invest, households are more willing to spend, and investors are more willing to take productive risks when they have confidence that the financial system will continue to support them through good times and bad.

Financial stability remains the FPC's primary objective and the single most important contribution we can make to sustainable growth.^{footnote [1]} Against that backdrop, the key question is not whether resilience supports growth, but how a resilient financial system can most effectively channel capital towards productive investment and high-growth firms.

That is the question underpinning a series of Insights the Bank is publishing over the next two weeks.

1. The first article – Who finances UK business? – explores how the UK's business finance system has evolved since the financial crisis. It shows how a more resilient banking system, alongside the growth of challenger banks, capital markets and other non-bank lenders, has broadened financing options for firms. While banks remain important to financing small and medium-sized enterprises (SMEs), larger corporates increasingly access bond markets and institutional investors, while many high-growth firms rely on specialist sources of risk capital. This more diverse financial ecosystem can better match different firms to their financing needs and support investment and growth, although growing links between banks and market-based finance mean risks may transmit across the financial system in new and different ways to the past.
2. The second article – Who benefits when banks go digital? – explores whether fintech partnerships can improve access to finance for SMEs. The research finds that digital lending technologies are associated with larger and cheaper loans, particularly in rural and less densely populated areas, suggesting they can help reduce some geographic financing frictions. However, the benefits are concentrated among lower-risk firms, indicating that fintech alone may not solve the financing challenges faced by the most credit-constrained businesses or high-growth firms.
3. The third article – Examining bank lending to high-growth firms – explores how financing patterns differ for high-growth firms. It finds that sectors with higher concentrations of these firms tend to make less use of traditional bank lending and attract a greater share of private equity and venture capital investment. This reflects the nature of many high-growth firms that are built around intangible assets and have uncertain future cash flows, making specialist forms of risk capital better suited to their funding needs. The article highlights the importance of a diverse financing ecosystem and the ongoing work to understand whether barriers remain to financing high-growth firms and their funding vehicles.

These Insights build on nearly two years of work by the FPC to understand where financing frictions may be holding back productive investment and high-growth firms. Recent work examined the demand and supply side challenges facing SMEs in accessing external finance (July 2025 Financial Stability Report (Box B)) (Manning et al (2026)). It found that higher impairment rates and operating costs, rather than capital requirements, are the primary driver of lower returns on SME lending. Other analysis has explored the barriers faced by high-growth firms, including difficulties accessing suitable long-term capital and financing business models built around intangible assets and uncertain future cash flows (Unlocking growth: Bank Overground (2025)), (December 2025 Financial Stability Report (Box A)).

Taken together, the evidence points towards an important conclusion. The challenge is often not simply the quantity of finance available, but whether firms can access the type of finance best suited to their needs and stage of development. Our engagement across investors, lenders and market participants to date suggests that capital and interest exist, but risk appetite, governance constraints, fee structures, ticket-size mismatches and fragmented public-sector coordination can prevent that capital from reaching high-growth firms in a timely and timely and usable form. 

Questions for policymakers

Findings to date have helped focus attention on potential solutions including digital lending technologies, improvements in information sharing and credit assessment, intellectual property-backed lending, specialist growth-capital providers, and the mobilisation of long-term pools of institutional capital capable of supporting firms and their funding vehicles as they scale. 

But, it has also raised broader questions for policymakers: 

• As the financial system evolves, what should be the respective roles of banks, capital markets and non-bank financial institutions in financing different types of firms, particularly SMEs and high-growth businesses?
• Are risks sitting with the institutions best placed to bear them? 
• How do existing regulatory frameworks influence the allocation of finance across the economy, and how important are those affects relative to underlying differences in risk and demand?

These questions, and others, are increasingly being considered by central banks and regulators around the world. In the UK, they are reflected in ongoing work ranging from the review of the bank capital framework to analysis of system-wide risks and interconnections through the Bank's System-Wide Exploratory Scenario. How these questions are answered will help shape future work on how the financial system can further support productive investment and growth while maintaining resilience. 

Later this year we will bring together researchers, policymakers, regulators, investors and industry participants through a dedicated conference. Taken together, this programme of work will inform the FPC's assessment of how the UK financial system can improve the matching of long-term capital to productive investment opportunities, particularly for high-growth firms, while maintaining resilience. The Committee will report its findings in the 2026 Q4 Financial Stability Report.

Why this matters

This debate is not about finance for its own sake.

It is about ensuring that viable firms with good ideas can access the funding they need to grow. It is about supporting investment and productivity growth. And it is about ensuring that a resilient financial system continues to serve households, businesses and the wider economy efficiently.

This Insight series contributes evidence to that debate. Publishing this analysis now allows us to share emerging findings, test them externally and support a more informed discussion about where financing frictions are genuine, where they may be overstated and where policy attention could be most useful. In doing so, we aim both to strengthen the evidence base for the FPC work and to encourage other policy makers and the wider research community to explore these topics further. 

A well-functioning financial system is rarely the headline, but it is one of the foundations for sustainable growth. Creating the right environment so finance can flow to the people, businesses and projects that will drive the UK’s future prosperity is a key part of that. This work is just one of the ways through which we are working to ensure the financial system remains a source of strength for the wider economy.

Bank Insights articles do not necessarily represent the views of the Bank of England’s policy committee members.