As of February 2025, the UK business loan market is experiencing a period of growth and increased activity, reflecting broader economic trends and evolving financial landscapes.
Lending Growth: Recent data indicates a resurgence in business lending. In the first quarter of 2024, lending to small and medium-sized enterprises (SMEs) by high street banks increased by 15% compared to the previous quarter, totalling just over £4 billion. This figure is 8% higher than the same period in 2023. Notably, regions such as the East Midlands, London, and the North East saw significant increases in new lending to SMEs. (UK Finance.Org)
Bank Performance: Major financial institutions have reported positive outcomes attributed to loan growth. For instance, NatWest’s annual profits for 2024 rose to £4.8 billion from £4.6 billion the previous year, driven by loan book expansion and improved net interest margins. The bank’s net interest margin increased slightly to 2.19%, despite economic challenges. (FT.com)
Economic Context: The UK’s economy demonstrated unexpected growth of 0.1% in the fourth quarter of 2024, bolstered by a 0.4% rise in December’s activity. While this indicates resilience, per capita analysis revealed a decline in living standards over the past two quarters. The UK’s competition regulator has pledged to adopt a more growth-oriented approach to address these challenges. (The Guardian)
Alternative Financing: Community-based finance initiatives are playing a crucial role in supporting small businesses, especially those in economically disadvantaged areas. A recent two-year scheme by the British Business Bank involves a £150 million initial investment to support community development finance institutions (CDFIs). This initiative aims to increase annual lending to underserved small firms from £102 million to £500 million by 2029, with an expected total financial impact of £1 billion over five years. (The Times)
Market Outlook: Projections suggest continued growth in bank lending to UK businesses and households, with forecasts indicating a 2.6% increase in 2024, followed by 3.7% in 2025 and 4.3% in 2026. Business lending specifically is expected to grow by 3.1% in 2024, 5.6% in 2025, and 6.2% in 2026, as interest rates and inflation continue to fall. (EY.com)
In summary, the UK business loan market is exhibiting signs of recovery and growth, supported by increased lending from traditional banks, positive economic indicators, and the expansion of alternative financing options. Our team has raised capital for SMEs of over £250m, if you are looking to grow and need funding please get in touch.
Pat McCreesh
pm@the-growth-hub.com
Partner
The Growth Hub
www.the-growth-hub.com