GlobalData
2 min read
Business lending by high street banks in the UK increased to £4.6bn ($6.2bn) in the first quarter of 2025, according to UK Finance's latest Business Finance Review.
This marks the sixth consecutive quarterly rise and the highest amount since the second quarter of 2022, driven largely by small and medium-sized enterprises (SMEs).
The report highlights a 14% year-on-year increase in lending, with agriculture, manufacturing, wholesale and retail, and health sectors leading the growth.
Lending to the smallest businesses, with an annual turnover of up to £2m, surged nearly 30% year-on-year, while lending to medium-sized businesses rose by 9%.
Loan and overdraft approvals also saw growth. The number of new loans and overdrafts approved increased by 37% and 8%, respectively, in comparison with the same period last year.
Although the number of finance approvals rose across almost all sectors, the value of approvals was lower than the previous year, UK Finance said.
It added that the SMEs have a “reasonable degree of headroom” within their existing finance facilities, with utilisation rates remaining steady at around 50%.
It suggests that the demand for new or increased facilities is a precautionary measure against rising costs and pressure on margins.
The data for this review was provided by several institutions, including Barclays, Lloyds Banking Group, HSBC Bank, NatWest Group, Santander UK, and Virgin Money.
In Northern Ireland, contributors included Bank of Ireland, Danske Bank, First Trust, and Ulster Bank, along with the SME business of Barclays, HSBC Bank, NatWest, and Santander UK.
UK Finance managing director of commercial finance David Raw said: “SMEs are a vital part of the UK economy, and it is encouraging that lending to them continues to go up. It is particularly welcome to see small businesses specifically accessing greater levels of finance than this time last year.
“The regulatory environment is important, and that is why we think the government should make the Growth Guarantee Scheme permanent and increase the size of the scheme’s budget. This would help support even more SME lending.
“Banks have finance available for SMEs, enabling them to invest and grow. The industry will continue to work with businesses, government and regulators to support both the supply and demand of finance, driving economic growth.”
Earlier this month, a study by specialist SME lender Shawbrook revealed that 71% of SMEs experienced growth in the past year, with 21% reporting significant growth.
This is a notable increase from 2024, when only 46% of SMEs reported growth and 13% experienced significant expansion.
