Abstract
The transition to a circular economy requires a fundamental reorientation of capital allocation within the UK financial system. Despite growing regulatory pressure and voluntary sustainability commitments, British commercial banks continue to finance predominantly linear business models, constraining the systemic change needed to address resource depletion and climate breakdown. This developmental paper employs a qualitative secondary data methodology to examine how circular economy principles can be embedded within UK banking practice. Drawing on institutional reports, regulatory publications, peer-reviewed literature, and industry datasets published between 2018 and 2025, the paper develops a Circular Banking Model comprising four interdependent components: circular credit assessment, purpose-designed financial instruments, client transition advisory, and portfolio circularity governance. The paper argues that circular banking represents not merely an environmental obligation but a strategic imperative, offering banks differentiated value propositions, improved long-run credit quality, and resilience to emerging physical and transition risks.