Labour MPs urge banks to expand lending to small businesses and low-income areas

Senior Labour backbenchers are pressing the government to force UK banks to expand lending to small businesses and low-income communities, warning that a lack of affordable finance is holding back entrepreneurship and economic resilience.

Gareth Thomas, a former business minister, has tabled a 10-minute rule bill that would require banks to measure, disclose and improve how they serve underserved communities and smaller firms. The proposal mirrors the US Community Reinvestment Act, which obliges American banks to demonstrate how they support poorer areas and small enterprises.

Thomas said the cost of living crisis had exposed deep weaknesses in access to affordable credit across the UK economy. He argued that millions of households and early-stage entrepreneurs struggle to secure low-cost finance at precisely the moments when it could prevent financial distress or enable business growth.

The bill has attracted backing from a group of senior Labour figures, including Treasury select committee chair Meg Hillier, business and trade committee chair Liam Byrne, work and pensions committee chair Sarah Owen, and former shadow chancellors Anneliese Dodds and John McDonnell.

Under the proposed legislation, banks would be required to report on their performance in reducing financial exclusion and improving access to finance for small and medium-sized enterprises. Regulators would then rate banks against those criteria, increasing transparency and applying pressure to improve outcomes.