Key takeaways

  • The FT reported that, with Andy Burnham coming to power, NatWest and Lloyds are pushing their regional lending credentials to finance the new Labour leader’s devolution agenda.
  • NatWest returned to full private ownership on 30 May 2025, more than 16 years after its £45.5bn taxpayer bailout, and posted a 19.2% return on tangible equity for 2025.
  • Lloyds has said it will make up to £35bn of new finance available to UK companies in 2026, including £9.5bn earmarked for SMEs.
  • Devolution vehicles such as mayoral strategic authorities, Local Growth Plans and the £27.8bn National Wealth Fund are designed to crowd in private bank finance.
  • Regional lending carries real risks: commercial property exposure, SME credit quality, and the gap between political ambition and bankable projects.

Britain’s two largest domestic banks are repositioning themselves for a political moment. According to reporting by the Financial Times, the arrival of Andy Burnham as Labour leader has prompted NatWest Group and Lloyds Banking Group to talk up their regional lending credentials, presenting themselves as natural partners to finance a devolution agenda that promises to push money, powers and decision-making out of Whitehall and into England’s city-regions. The FT framed the shift as a decisive break with the old assumption that Britain’s growth story begins and ends in the South East.

The pitch is straightforward. If the next phase of UK economic policy is built around mayors, combined authorities and locally set growth plans, then the banks that already lend to small firms, housebuilders and infrastructure projects in every region of the country expect to be in the room. Whether that expectation translates into profitable, durable lending — or into concentrated exposure to a set of regional bets that do not all pay off — is the question now facing shareholders, borrowers and policymakers alike.

This article sets out the reported positioning, explains who these banks are and how they finance regional growth, examines the devolution machinery and public co-investment vehicles now in place, and weighs the opportunities against the material risks.

The reported positioning: banks lean into the regional story

The Financial Times, in its banking coverage, reported that NatWest and Lloyds are actively marketing their regional lending strength as Burnham takes the helm of the governing party and elevates devolution to the centre of the economic programme. The framing is notable because it reverses a long-standing narrative in which the City of London and its financial firepower sat at a distance from the industrial towns and cities of the North and Midlands.

Both banks have grounds to make the case. NatWest describes itself as the UK’s biggest bank for business, supporting around 1.5 million companies ranging from sole traders to multinationals, and its 2025 results highlighted particular lending strength in infrastructure, project finance and social housing. Lloyds, which owns Bank of Scotland and Halifax as well as the Lloyds and commercial banking brands, has built its identity around the slogan of being a bank for UK households and businesses, with a dense branch and relationship-manager footprint across the regions.

It is worth being precise about what is verifiable and what is context. The political backdrop — Burnham’s rise and the emphasis on devolution — and the specific claim that the banks are courting that agenda come from FT reporting. The banks’ underlying scale, lending commitments and financial performance are drawn from their own published results and from independent data, and are set out below.

Who NatWest and Lloyds are — and why privatisation matters

NatWest Group and Lloyds Banking Group are two of the four large domestic-focused UK banks, alongside Barclays and Santander UK, that between them provide the bulk of everyday banking and business lending in Britain. Both were rescued by the taxpayer during the 2008–09 financial crisis, and the arc of their recovery frames how they present themselves today.

NatWest — formerly Royal Bank of Scotland Group — received about £45.5bn of taxpayer support in 2008 and 2009, the largest bailout of any UK bank. The government’s exit was a slow, multi-year process of share sales, dividends and fees. On 30 May 2025, HM Treasury confirmed that the state had sold its final shares, returning NatWest to full private ownership more than 16 years after the rescue. The Treasury said around £35bn had been returned to the Exchequer over that period, roughly £10.5bn less than was originally put in. Chancellor Rachel Reeves said the original intervention “was the right decision then to secure the economy” and that the return to private ownership “turns the page on a significant chapter in this country’s history.”

The symbolism matters for the devolution debate. A fully privatised NatWest is free of the political constraints and reputational overhang that came with state ownership, and its management has leaned into a growth narrative. For 2025 the group reported operating profit before tax of £7.7bn, up from £6.2bn, and a return on tangible equity of 19.2%, one of the stronger figures among large European banks. Total loans to customers rose 5.6% to £389.2bn, with commercial and institutional gross lending up around £10bn. Chief executive Paul Thwaite struck a “cautiously optimistic” tone on the UK economy, pointing to continued growth and low unemployment.

Lloyds occupies a different but complementary position. It is the UK’s largest retail bank and a major SME and mid-corporate lender, with a business model heavily weighted towards the domestic economy and, in particular, towards mortgages and small-business banking. That domestic tilt makes Lloyds unusually exposed — for better and worse — to the fortunes of the UK regions. In late 2025 the group said it would make up to £35bn of new finance available to companies operating and investing in the UK during 2026, including £9.5bn specifically for SMEs, and noted it had arranged or provided more than £100bn of infrastructure financing over the previous five years. Chief executive Charlie Nunn said businesses “power our economy,” framing the commitment as fuel for their growth.

How banks finance regional growth

Regional growth, in banking terms, is not a single product. It is a bundle of activities that together determine how much credit reaches a town, a sector or a project.

SME and business lending is the foundation. Small and medium-sized firms are the largest employers in most regions, and their access to working capital, asset finance and growth loans shapes local economies far more than headline infrastructure schemes. Industry data from UK Finance showed gross SME lending by the main banks rising to about £17.5bn in 2025 from £16.1bn a year earlier — a second consecutive annual increase, with lending to the smallest firms up by more than a quarter. UK Finance said the lending was spread relatively evenly across the UK’s nations and regions, and that new loan approvals had overtaken overdraft use, a sign of firms borrowing to invest rather than merely to cover cash-flow gaps.

Commercial real estate and housing finance is the second pillar. Banks fund the developers, housing associations and build-to-rent operators that deliver homes and workspace, and mayoral regeneration ambitions typically depend on this capital. NatWest specifically flagged social housing as an area of lending strength in 2025.

Infrastructure and project finance covers transport, energy, digital connectivity and utilities — the long-dated assets at the heart of most regional growth plans. Both NatWest and Lloyds run dedicated infrastructure and project-finance teams, and both have made public commitments to expand this activity.

Local partnerships and advisory work ties it together: relationship banking, cash management for local authorities, and increasingly, structuring roles alongside public bodies. The banks’ regional pitch rests on the argument that a lender with people on the ground in Manchester, Leeds, Birmingham and Newcastle can assess local risk better than a purely centralised model.

The devolution agenda and public co-investment

The reason banks are paying attention now is that the plumbing of English devolution has been substantially rebuilt. The English Devolution and Community Empowerment Bill, introduced in 2025, creates a standardised category of “Strategic Authorities” across three tiers — foundation, mayoral and established mayoral — encompassing combined authorities, combined county authorities and the Greater London Authority. Mayors gain new economic-development tools, including a duty to produce Local Growth Plans, the power to set up Mayoral Development Corporations for regeneration, planning call-in powers, and a role in coordinating Local Government Pension Scheme investment.

For lenders, the significance is that these authorities are becoming institutional counterparties with their own strategies, budgets and, in some cases, investment vehicles. A mayor with a Local Growth Plan, a development corporation and access to pooled pension capital is a very different partner from a fragmented set of district councils. That is precisely the environment in which a large bank can co-lend, provide bridging finance ahead of public grants, or arrange debt for schemes that a public body seeds with equity.

Sitting above the mayors is the National Wealth Fund, created in October 2024 when the UK Infrastructure Bank was rebadged and given an expanded mandate. Capitalised at £27.8bn, the NWF is designed to “crowd in” private finance to clean energy, infrastructure and growth sectors, and it explicitly provides lending and advisory services to local authorities while “strengthening its partnerships with Mayors.” The model is deliberately catalytic: public money takes early or subordinated risk so that commercial lenders such as NatWest and Lloyds can participate on terms they can justify to shareholders. If devolution supplies the local demand and the NWF de-risks the biggest projects, the banks supply the volume.

What it means for SMEs, regions and shareholders

For SMEs, a more competitive, regionally focused lending environment is broadly positive. More lender attention, clearer local growth priorities and public co-investment can widen access to finance for firms that have historically struggled to secure it outside London. The caveat is that headline commitments — the “up to £35bn” of finance Lloyds has flagged for 2026, for example — represent capacity to lend, not guaranteed drawdown. Whether the money flows depends on business confidence, viable projects and firms’ willingness to take on debt.

For regions, the prize is a virtuous circle in which devolved decision-making, patient public capital and commercial bank lending combine to fund housing, transport and business growth. The risk is uneven delivery: mayoral authorities differ widely in capacity and deal pipeline, and the areas most in need of investment are often those where projects are hardest to make bankable.

For shareholders, regional lending is a growth avenue but not a one-way bet. Both banks are enjoying strong returns — NatWest’s 19.2% RoTE is a case in point — partly because higher interest rates have supported margins. Expanding into infrastructure, commercial property and SME lending can diversify income, but it also lengthens balance-sheet risk and ties earnings more tightly to the domestic cycle. Nothing here should be read as a view on either company’s shares; the point is simply that opportunity and exposure rise together.

Opportunities, challenges and material risks

The opportunity is real. Britain’s regional investment gap is well documented, the policy architecture to close it is more coherent than it has been for years, and the two banks best placed to service it are both profitable and domestically focused. If devolution succeeds, first-mover lenders stand to build durable relationships with mayors, developers and fast-growing regional firms.

The challenges and risks are equally concrete:

  • Commercial real estate. The Bank of England’s Financial Stability Reports have repeatedly flagged commercial property as a vulnerability, given refinancing pressures and valuation uncertainty. Regeneration-heavy regional lending increases exposure to exactly this asset class.
  • SME credit quality. Smaller firms are more sensitive to economic slowdowns; a downturn would raise impairments fastest in the SME book that regional strategies rely on.
  • Execution and delivery. Political ambition does not automatically produce bankable projects. Planning delays, thin local delivery capacity and stop-start funding can leave commitments unspent.
  • Concentration. Leaning into UK regional lending deepens both banks’ dependence on the domestic economy, offering less insulation than more geographically diversified peers if Britain underperforms.
  • Policy risk. Devolution settlements, the National Wealth Fund’s mandate and local funding streams are all subject to future political change.

Prudential policy partly offsets some of this. The Prudential Regulation Authority has retained adjustments — a longstanding SME lending “support factor” and an infrastructure adjustment — that reduce the capital banks must hold against qualifying loans, an explicit signal that regulators want credit to flow to smaller firms and long-term projects.

Counterarguments

A degree of scepticism is warranted. Critics will note that big banks routinely announce large lending “commitments” that track what they would have lent anyway, and that a regional rebrand can be as much marketing as strategy. Some argue that the real constraints on regional growth are planning, skills and infrastructure delivery rather than the availability of bank credit — in which case more willing lenders make little difference. Others point out that community development finance institutions, challenger banks and the British Business Bank already target underserved regional borrowers, and that the incumbents’ renewed interest may crowd out rather than complement them. And there is a historical caution: previous waves of regional policy enthusiasm have faded when political attention or public money moved on. The banks’ challenge is to show that this cycle produces lending that is both additional and sound.

What happens next

Watch three things over the coming months. First, the passage and implementation of the English Devolution and Community Empowerment Bill, which will determine how much real power and money mayors actually control. Second, the banks’ own disclosures — NatWest and Lloyds interim results, and any region-specific lending or partnership announcements, will show whether the rhetoric is being matched by drawdown. Third, the interaction between the National Wealth Fund and commercial lenders on flagship regional projects, which will be the clearest test of whether public capital is genuinely crowding in private finance. Bank of England financial stability commentary on commercial property and SME credit will remain the key gauge of whether the risks are building.

Conclusion

The convergence of a devolution-focused government, a rebuilt set of regional institutions and two large, profitable and domestically anchored banks is a genuinely significant moment for how Britain finances its growth. NatWest, fully private again after the longest of bailout hangovers, and Lloyds, with its deep SME and mortgage franchise, both have credible claims to be central to it. But the same features that make regional lending attractive — its scale, its length and its dependence on the domestic cycle — are what make it risky. The story the FT has identified is real; whether it ends in durable regional growth or in a concentrated set of bets will depend on execution as much as ambition.