Government lending for growth: how the Government is steering the PuFIns’ flight 

Introduction

A strange new term is echoing through the corridors of power in Whitehall: the ‘puffin’ (or, strictly, the PuFIn). Public financial institutions have long been a feature of government activity outside the UK – from the US mortgage giants Freddie Mac and Fannie Mae to Germany’s Kreditanstalt für Wiederaufbau or KfW, eyed with envy from Whitehall for decades. But for reasons of history and public accounting, they have played a vanishingly small role in public finance in the UK. That is slowly changing. New fiscal targets and beefed up balance sheets mean the UK’s puffins are set to take flight. How can business capitalise? 

Why the Government lined the PuFIns’ nests 

In the Autumn 2024 Budget, the Chancellor made three decisions to accommodate the £70 billion worth of additional spending she felt was necessary to put public services on a sustainable path and erase the planned cuts to public investment she inherited. First, she announced plans to raise taxes by over £40 billion a year. Second, she unlocked a further £15 billion of space by accepting that the conventional measure of debt would rise slightly in the medium term, rather than fall slightly. This would have broken the letter of the manifesto commitment to get “debt falling as a share of the economy”, so her third act changed the definition of debt. By switching to public sector net financial liabilities (PSNFL), which nets off illiquid financial assets like loans rather than only liquid ones like foreign exchange reserves, she added £20 billion more wriggle room, and restored a slim margin against her updated fiscal rules. 

Switching to PSNFL also changed the incentives facing government in two important ways:

• First, the value of loan and equity investments is now offset against any debts issued to finance them, so the debt rule no longer disincentivises making worthwhile financial investments. This is what freed the puffins to grow. We can see this incentive in action already, with recent policy decisions increasing financial investments at every opportunity and almost doubling the envelope available by the end of the Parliament. 
  
  
• But it is also worth noting that, second, because non-financial investments (i.e. conventional capital spending) do not net off under PSNFL, the rule now creates an incentive for the Government to take financial stakes in companies or extend loans, rather than invest in non-financial assets, regardless of whether this is the most effective option for achieving public policy objectives. Recognising the risks this might pose, the Treasury beefed up the ‘control framework’ that guides departments making financial investments and promised to set out ‘strategic steers’ to key institutions – the puffins’ flight will still be constrained by 1 Horseguards Road, even if their wings are no longer fully clipped by the fiscal targets. 

The ecosystem that PuFIns inhabit 

PuFIns are responsible for deploying this greater financing capacity (as well as providing some further financial support for business by guaranteeing loans made by the private sector). They include a range of newly created or substantially expanded bodies, so the total funds that they are able to call on is much larger than the the additional funding shown in the left-hand side of Figure 1 above. The PuFIns are: 

• The National Wealth Fund (NWF), known as the UK Infrastructure Bank until October 2024, when it was relaunched with “£27.8 billion of capital”. It has since also committed to providing a loan of up to £36.6bn on top of this to finance the construction of Sizewell C nuclear power station. 
  
  
• The British Business Bank (BBB), which saw its role beefed up, and financial capacity expanded “by approximately two-thirds to £25.6 billion” at the 2025 Spending Review. This figure includes £8 billion worth of guarantees. 
  
  
• Great British Energy (GBE), which was newly created via “£8.3bn capitalisation” and which, alongside powers to invest in financial instruments, can develop, own, and operate energy assets.  
  
  
• National Housing Bank (NHB), a recently announced addition that will be a subsidiary of Homes England, “backed with £16 billion of financial capacity, on top of £6bn of existing finance”. 
  
  
• Other lending institutions include a range of smaller PuFIns such as Innovate UK, UK Export Finance, and British International Investment, devolved bodies like the Scottish National Investment Bank and Development Bank of Wales, and the Student Loans Company.  

A(uk) strategy – for the country’s financial investments 

The Government has now provided strategic steers to three big PuFIns the NWF, BBB and GBE) that detail the core objectives that they are charged with delivering, and a helpful guide to the overall public investment landscape. In turn, the PuFIns have begun to respond formally to set out how they intend to achieve these goals. GBE has recently set out its strategic plan, resolving some of the uncertainties around its objectives outlined in a previous Flint insight, as has BBB. The NWF has not only begun to indicate how it intends to achieve its goals but also how it intends to assess its impact. 

What should business take away from all of this activity? 

• Who to go to. By detailing different institutions’ roles and responsibilities, the strategy documents begin to draw a roadmap for guiding prospective borrowers to the right lenders. For instance, those seeking public help to finance investments in the very newest technologies and/or markets might want to go to Innovate UK, while UK Export Finance and Homes England are likely to help in more established fields. To further clarify these interactions, the Government has set up a Strategic Public Investment Forum, to avoid unwanted gaps and overlaps arising.And steps have been taken to support mayoral authorities to attract regional funds, including via the Government’s Regional Investment Forum and strategic partnerships with the NWF to develop infrastructure project pipelines in four city regions.

• How to show a project’s impact. There are similarities between thedifferent institutions’ objectives, but also important differences. For instance, all three bodies are charged with supporting the Government’s growth and clean energy missions, but the NWF has the most freedom in how it interprets these goals, the BBB’s steers suggest demonstrating impact on the eight Industrial Strategy priority sectors is crucial, while GBE’s first objective – delivering clean power and net zero emissions – has the narrowest sectoral lens. 

• The key objectives of all three strategic steers explicitly stress the importance of ‘additionality’ – i.e., showing that deploying public funds will secure something that would not have gone ahead in their absence. This is no longer being policed doggedly on a case-by-case basis – asking for documentary evidence that all avenues for private finance have been exhausted – but is still an important hurdle to clear. Given the renowned ability of London’s financial markets to allocate funds to profitable projects, additionality can be hard to demonstrate convincingly for financial investments - and doing so will require a clear understanding of how each institution is tackling the issue. 

• The PuFIns’ appetites for risk. Public investments can help deliver important social objectives, but expose the taxpayer to additional risk, as the Office for Budget Responsibility warned in last year’s Fiscal risks and sustainability report. Partly reflecting this tension, the Treasury control framework requires portfolios’ financial performance to outperform a benchmark provided by the government’s cost of financing (or, where policy intent is explicitly concessional, to be subject to stringent additional controls).  The BBB’s strategic steer charges it with meeting this benchmark from the outset across its portfolio as a whole, while the NWF is additionally required to exceed a further margin to reflect operating costs. In contrast, GBE is permitted to take on higher-risk projects initially, provided its commercial activities generate positive portfolio-level returns and place it on a path to financial self-sufficiency by 2030. 
  

How can Flint help

These institutions are large deployers of capital actively seeking projects to invest in and co-investors to partner with. They provide a new avenue for investors in the UK to generate return and for firms to source funding. They can flex their model according to demand, investing across equity, debt, and guarantees. 

They remain, however, state sponsored entities, which means they respond to different incentives than financial partners. At a recent event, NWF officials noted how one of the first things they do when they receive a pitch is to write the final press release announcing the investment, to assess whether it aligns with their goals. They also have to manage fiscal rules and stakeholders set in HM Treasury. 

Flint can help you unlock PuFIn funding and co-investment opportunities, by ensuring you are pitching in a way which they can respond to. This applies not just to commercial investors but also to mayoral strategic authorities looking to accelerate the delivery of regeneration, transport and clean energy projects. 

We develop compelling funding models and financing bids, shaping the investment narrative and modelling economic impacts, drafting key bid content, and advising on how to meet government objectives and decision-maker priorities. We support clients on negotiations with government in financing/funding processes, positioning bids, providing materials, briefing officials, and managing political sensitivities.  

We can help navigate the right routes to the institution that is best placed to support your project and how to align your proposition with their priorities and internal processes. Our cross-party insight helps clients anticipate how ministers, officials and regional authorities are thinking and where the opportunities and constraints lie. 

We can also help with analysis that supports your case, as we understand not just the politics and policy surrounding key decisions, but also the economics. We bring deep expertise in the fiscal rules, accounting treatments and policy controls that shape major public investment decisions. And our modelling team combines this with an understanding of how all levels of government assess economic and social value, letting you demonstrate additionality and economic returns in ways that resonate with policymakers.  

Get in touch if you’d like to discuss how Flint can help your business work with the UK’s expanding public financial institutions.

This blog was written by Director Tom Wickstead, Specialist Partner Andy King, and Partners James Heath, Joe Jones, and Virginia Sentance. Tom brings experience modelling the economic and public finance impact of policy measures from roles at the Treasury and Office for Budget Responsibility. Andy leads Flint’s overall economic modelling offer, helping clients understand how to analyse the economic impacts of Government policies, and analyse businesses’ and investments’ impacts. James supports clients across a range of policy issues with a focus on infrastructure. Joe leads Flint’s work with private market clients, helping them understand and address political and regulatory risks and opportunities. Virginia leads on climate, energy, and sustainability issues. 

Get in touch if you’d like to discuss how Flint can help your business can work with the UK’s expanding public financial institutions.

 References

1. UK Government, Over 500,000 homes to be built through new National Housing Bank 
2. National Wealth Fund, Laying the foundations for growth: Inaugural Impact Report 
3. HM Government, Strategic priorities to the British Business Bank 
4. HM Treasury, Financial Transaction Control Framework (March 2025) 
5. HM Government, Strategic Steer to the National Wealth Fund 
6. Homes England, organisational overview 
7. Great British Energy, Statement of Strategic Priorities 
8. Great British Energy, Accelerating the UK’s clean energy future