Impact Finance Bulletin: The 'game changing' power of the UK government over social investment

Yesterday in the UK, all eyes were on the chancellor Rachel Reeves who was delivering her much-awaited Budget, trying to improve the country’s finances without crashing the economy. But if you’re still sifting through the documents with a magnifying glass trying to find anything new on impact finance, you’re not alone: no big bang announcement from the chancellor directly affecting the sector this time – only a reiteration of two flagship measures announced earlier this year: the £500m Better Futures Fund and the recent launch of the Office for the Impact Economy. 

Big Issue Invest managing director Holger Westphely summed up what seemed to be a general feeling: “We would have liked to see more specific measures in the Budget that could unlock private capital for public good. Social enterprises are amongst the most important creators of growth and new jobs within the wide SME sector in the UK.”

Some moves will indirectly affect the sector. Better Society Capital points to announcements on “place-based budget pilots” and other locally-focused investments where social investment could play a role through place-based impact investing, a strategy that has gained traction in recent years, for example.

In any case, no-one seemed to be expecting much from this Budget, but everyone was keeping an eye on it: we know ministers’ decisions can have huge impacts on the sector, and policymaking has played a big role in the development of the social investment market in the UK over the past 15 years.

I was reminded of this during my conversation with Stephen Muers, CEO of Better Society Capital, earlier this week about BSC’s latest state of the market research, also published yesterday (see our analysis of the data here). 

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UK social investments reached £11.2bn in 2024; and while investments in social and affordable housing – a relatively low-risk area – grew healthily over that year, that wasn’t the case of other areas of the market.

Non-bank lending to social enterprises, which includes blended finance, broadly flatlined. “A few months ago, that [segment was] what we worried about”, Muers told me. The market was at risk of stalling, mainly because the new dormant asset money used to anchor blended finance deals – already announced under the previous government and reiterated by the Labour government in June 2025 – was only confirmed by ministers this autumn, preventing social investors from moving forward with new projects until then. “That bit of the market would have got really stuck had that money not been released,” said Muers.

Another area that has failed to grow at all in the past few years is social outcomes contracts; but there again, new government measures are expected to be a “game changer”: the £500m Better Futures Fund, a 10-year outcomes fund to support vulnerable children, should revive the sector, Muers said.

This month also saw the announcement of the creation of the Office for the Impact Economy by the UK government. It was welcomed by the sector across the board – but many warn that what it delivers will be the most important. The government can be a powerful, or lazy, partner for social and impact investing; the current bunch have so far been supportive, but given the persistent economic challenges and political shifts, whether it will continue to be a strong ally remains to be seen.

This month's top stories 

UK social impact investment market tops £11bn in 2024 – Better Society Capital

Global VC investments in impact startups fall to lowest level since 2017

How catalytic capital and blended finance can drive growth across Africa

On our radar

Do conferences really deliver what people want? This year I’ve heard people privately saying that there are too many conferences, with the same crowd recycling similar arguments that don’t lead to action.

So it was interesting to hear that the bosses of Impact Europe were proactively seeking feedback from delegates at its annual Impact Week gathering, which took place in Malmö, Sweden this year (make sure to read the report from my colleague Julie Pybus for the lowdown). Speaking at the closing session, new CEO Angela Wiebeck said the team would take the varied feedback it had received on board to “recalibrate” the network’s flagship event, the next edition of which will take place in the first quarter of 2027. “We really want to be able to look at what we're offering here, and make sure that this is really what you need,” she said.

Under the radar...

It's incontestably a good thing to invite different voices to the stage at impact investing events. But it can run risks, as our recent conversation with one leader revealed. She reflected watching nervously as invited dignitaries bristled at some of the more unscripted comments from a young speaker. The gamble paid off though, she reflected, noting that the discussions benefited hugely from the inclusion of diverse perspectives.

Top image: Rachel Reeves about to deliver the Budget on 26 November 2025. Picture by Simon Dawson / No 10 Downing Street.