Financial Services and Markets Bill [Lords]

Mike Martin Excerpts

Tuesday 10th November 2026 Commons Chamber

[Mike Martin (Tunbridge Wells) (LD)]

We on the Liberal Democrat Benches broadly support the Bill. Modernising a framework that has grown complex over decades is sensible and there is much here to welcome, from wider credit union membership to protecting in-person banking and tougher defences against financial crime.

I want to use my brief time to talk about a missed opportunity, and I hope the Government will take me up on it. It relates to the Chancellor’s former job. The Government rightly want to rebuild our defence industry, and small firms are one of the bedrocks of that goal. With the way that warfare is accelerating, the cutting, bleeding edge is with small tech firms innovating in things such as AI and autonomy. The Ministry of Defence works with around 12,000 small and medium-sized enterprises through its supply chains, and spends about £5 billion a year with them. It is further set out in the defence investment plan and the strategic defence review that the MOD wants to spend a further £2.5 billion with SMEs by the summer of 2028. That is where defence is moving—if we want to win wars in the modern age, we have to have a robust defence SME sector,

Every small business, no matter what sector it is in, knows how hard it can be to raise finance, but many defence firms face an extra barrier. They are often refused bank accounts, loans or insurance simply because they work in the defence sector. SC Group—formerly Supacat—has won MOD contracts worth tens of millions of pounds, yet it has struggled to get investment or loans because it is not seen as acceptable. Another example is 4GD, which uses AI and robotics to run training simulators for British soldiers; the company stopped attending investment meetings and was actually turned away from one once the host found out it was a defence firm.

A couple of years ago, 15 SME defence firms formally raised the issue with their trade body, ADS, as they had actually had accounts closed by UK financial institutions. Obviously, those were just the firms that were willing to speak up; there are plenty that will have suffered adverse reactions when seeking credit but have chosen not to speak out—because what firm wants to advertise that they are unable to get capital or credit? The crucial point is that this is not because of regulation. In March 2025, the FCA stated very plainly that:

“There is nothing in our rules, including those related to sustainability, that prevents investment or finance for defence companies.”

The problem is that many investment and financial services firms have environmental, social and governance policies that explicitly name defence firms as being unacceptable for investment. The Government know that, because in the MOD’s SME action plan, which was published in July, they commit to working with everyone, from venture capital to high street banks, to make it easier for the financial sector to back defence SMEs. But there is a difference between knowing about a problem and setting out a robust way of fixing it, and that is what I want to focus on.

The Bill started in the House of Lords, where my noble Friend Baroness Kramer tabled amendment 67, which proposed a practical step that might go some way towards solving the problem. The amendment essentially required the Financial Conduct Authority to review how easily SMEs in sectors critical to our national security can get finance. More specifically, that review would examine the availability and cost of finance for defence firms, whether the FCA’s rules create barriers, whether lenders’ ESG policies, sector exclusions or risk assessments are shutting defence firms out, and whether defence SMEs find it materially harder to get finance than firms in other industries. Crucially, the review would finish with the changes that should be made to improve access to finance for defence SMEs—it should speak to the problems identified in the review.

When my noble Friend Baroness Kramer presented the amendment, among a package of others, the Government declined, saying that the framework was already proportionate to SMEs. I think something has been lost in translation there. Proportionality is not the issue; the FCA has told us that its rules are not the barrier. The question is about what regulated investment firms are actually doing. At the moment, nobody is monitoring that, but amendment 67 sought to do so, by mandating the FCA to carry out a review on a regular basis—once every two or three years.

I urge the Government and the Economic Secretary to use the Bill to honour the commitment made by other parts of Government to support SMEs—including defence SMEs—to have access to finance on a level playing field with other sectors. This is not a party political issue: in March 2025, more than 100 Labour MPs and peers wrote to banks and investors about exactly this problem, and it has also been raised on the Conservative Benches. On Report, pursuant to any conversations that the Minister might like to have with me, I intend to re-table the same amendment and seek cross-party support. I am pretty sure there will be robust support across the House. I would welcome the chance to meet with the Minister to discuss the issue, because I think we have an opportunity to strengthen the Bill as it goes forward.