Financial instruments to get £22bn additional funding in John Healey’s first Budget
27th October, 2026
On Wednesday 28 October 2026, the Chancellor of the Exchequer John Healey will deliver his first budget. Many of the funding announcements have already been the subject of press briefings, including that over £22bn will be made available to expand financial instruments.
What are financial instruments?
Financial instruments (also called Financial Transactions’) are public funds established to deliver public policy objectives through debt, equity and other risk based forms of investment. There are different fund structures, but it is common that investment decisions are made by procured fund managers and that returns from successful investments are recycled, enabling multiple interventions to be made from an initial award of public funding.
How is the Budget expected to support financial instruments?
Although all allocations will be confirmed in the Chancellor of the Exchequer’s speech on Wednesday it appears from press articles that, at least, four announcements involving the award of public funding to Financial Instruments will be made, with a total value exceeding £22bn. These are:
- £15.4bn of additional funding to support the HM Treasury owned National Wealth Fund (previously called the UK Infrastructure Bank) to support investment in business growth, infrastructure development and employment in sectors including artificial intelligence, defence and green energy. The government estimates that the investment could support approximately 100,000 jobs by 2035;
- £5bn to the British Business Bank (boosting its financial capacity to £30.6 billion) to co-invest in high growth scale ups, to create new jobs in strategic sectors and to boost regional economic growth
- £1.5bn to be made available in the form of a new borrowing facility open to Mayoral Strategic Authorities from 2028 that can be used to support local priorities such as new homes, bringing High Streets back to life, or improving transport links
- £285m to be provided as seed funding for Mayoral Strategic Authorities to establish Good Growth Funds. The Greater Manchester Good Growth Fund was established with £1bn investment and has already invested over £900m of investment across Greater Manchester to unlock a range of housing, employment space and strategic infrastructure projects
How does this fit into Andy Burnham’s vision?
Andy Burnham’s economic vision (sometimes called “Burnham-nomics“) is spelt out in the book “Head North” which he co-authored with Liverpool City Region Mayor Stever Rotheram.
His vision is built around a central principle, which is that re-industrialisation is the key to improving living standards and creating a more equal Britain. Creating the right conditions for re-industrialisation relies upon “re-wiring the State“, in particular moving power and funds out of Westminster and into the hands of local leaders.
This is in part because many of the best investment opportunities are outside London and the South East, but have not been realised due to issues relating to access to finance. An example is set out in the book of a large-scale tidal barrage scheme across the River Mersey and connecting Liverpool with the Wirral Peninsula. It is argued that this would generate reliable, low-carbon electricity and create thousands of local jobs. Although the idea is strong it has not progressed because public funding could not be secured.
The government has sought to address this issue by increasing the funding available to Metro Mayors, but sees Financial Instruments as dove-tailing with grant programmes to unlock large scale projects.
Financial Instruments have long been popular with politicians – in part because they offer the opportunity to recycle funding, thereby multiplying impact, but also because they offer the opportunity to leverage private sector co-investment at fund and project level.
Andy Burnham’s view will no doubt have been shaped by the success of the Greater Manchester Good Growth Fund which invests upon three overarching principles – these being (1) do just enough to lever in private sector investment (2) minimise grant funding, with investment recycled where possible and (3) capture value for reinvestment. These principles ensure the minimum funding is offered to unlock the project, but also the multiplier effect is achieved.
What legal issues arise when financial instruments are established?
Setting up a Financial Instrument requires specialist expertise, in particular understanding how corporate and banking arrangements work, but also the additional considerations which apply whenever public funding is involved. For example, lawyers will need to be able to advise upon the pros and cons of different funding structures, but also appreciate how to navigate public sector considerations such as subsidy control compliance, the public procurement rules and monitoring.
Imogen Holland, Partner in Ward Hadaway’s Banking and Finance team, said: “Wednesday’s announcement is being made because financial instruments have succeeded in the past, however any public authority taking on such funds needs to be aware of the potential issues from the outset. The most successful Financial Instruments involve careful planning at the outset and have a clear understanding as to how and when returns will be secured“.
Alexander Rose, Partner in Ward Hadaway’s Public Funding team, said: “in my previous role in the Government Legal Department, I worked with auditors looking into irregularities that had arisen in Financial Instruments. The most common mistake was a failure to scope out the issues thoroughly at the outset“.
Therefore, public authorities securing funding for Financial Instruments will want to properly understand the conditions which attach to the public funding, identify how their proposed investments will contribute to the public policy objective of the fund and develop a clear and coherent plan to set up their financial instrument.
Conclusion
The announcement that significant public funding will be directed towards financial instruments in John Healey’s first budget will be welcomed by the market. However, the success of this funding is likely to turn on how quickly and effectively it is deployed through the financial instruments.
Ward Hadaway’s lawyers have advised on Financial Instruments worth over £1bn and are on hand to help you set up and operate your funds. This includes managing subsidy control issues, navigating procurement and managing audits. Please do get in touch if we can be of assistance to you.
Please note that this briefing is designed to be informative, not advisory and represents our understanding of English law and practice as at the date indicated. We would always recommend that you should seek specific guidance on any particular legal issue.
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