UK SMEs have had plenty thrown at them over the past few years. Inflation, higher borrowing and employment costs, volatile energy prices, and geopolitical uncertainty have all created challenges. But what continues to impress me is the resilience of businesses and their willingness to keep investing when the right opportunities arise.
The latest figures from UK Finance support the idea that many SMEs are continuing to invest, borrow and pursue growth. The trade body’s latest Business Finance Review shows gross lending to SMEs reached £5.35bn in the second quarter of 2026, higher than the same period last year and a new post-pandemic high. In fact, year-on-year gross lending has now increased for ten consecutive quarters.
Perhaps one of the most striking findings is what has happened among medium-sized businesses. The data outlines that gross lending to medium-sized firms appears to have defied the turmoil surrounding the US-Iran conflict, with year-on-year growth gaining further momentum.
That is significant when you consider the volatility businesses were facing during the quarter, from higher energy costs to movements in financial markets.
It also tells us something important about the SME market, as challenging conditions do not necessarily remove the appetite to grow.
Resilience does not mean an absence of pressure
Despite these headline figures, we shouldn’t interpret them as suggesting that every business or sector is experiencing the same conditions.
UK Finance points to a more mixed picture beneath the overall numbers with lending weakening in areas such as manufacturing and hospitality, while real estate and professional services were important contributors to growth. Lending to medium-sized businesses also softened during May and June as oil prices and market volatility peaked.
There are also clear indications that businesses are managing working capital more actively. Overdraft utilisation reached 51.4% in June, its highest level since March 2020, while businesses in some sectors have been drawing more heavily on cash deposits. Loan applications also fell during the quarter as geopolitical tensions escalated.
These figures reinforce the point that resilience should not be confused with businesses simply carrying on as normal. SMEs are adapting and carefully reviewing costs, protecting cashflow, restructuring borrowing and deciding where to invest whilst at the same time, many are still prepared to act when the right opportunity arises.
That could mean acquiring a property, purchasing assets, refinancing shorter-term borrowing or making an acquisition that supports the next stage of growth and that is where the structure of finance becomes increasingly important.
Giving businesses greater stability
When the wider economic environment is unpredictable, having greater visibility over one of your largest costs can make a material difference to business planning.
That thinking was behind the August launch of a five-year fixed commercial mortgage option alongside our existing two-year fixed product. It was introduced following feedback from brokers and SME customers looking for greater stability around longer-term borrowing costs and cashflow management.
A five-year fixed rate will not be the answer for every borrower, and good lending is never about forcing every business into the same solution, but for an SME that wants predictable repayments while it concentrates on running and growing the business, longer-term fixed funding can provide valuable breathing room.
It can also give businesses the confidence to think beyond the immediate economic cycle. For the right borrower, that might involve replacing short-term debt with funding that better matches the life of an asset, acquiring commercial property or other assets, or putting finance in place so the business is able to move when an opportunity presents itself.
What matters is having the ability to act when the right opportunity comes along. Good businesses are constantly assessing risk, opportunity and how their funding needs may change as they grow.
Lenders need to show resilience too
The UK Finance figures are encouraging, but there’s another important statistic worth keeping in mind. Despite gross SME lending reaching a post-pandemic high, lending from the main banks remains below pre-Covid levels and, in real terms, lending during the first half of 2026 was still around a third below the 2019 average.
Therefore, there is clearly more work for the lending industry to do. SME resilience needs to be matched by lenders that are prepared to understand what businesses are trying to achieve, rather than simply responding to the economic headlines.
That means offering different funding structures decisively, looking at the individual circumstances behind an application and working closely with brokers to understand both the opportunity and the risks.
The economic and geopolitical environment will continue to change and there will inevitably be periods when confidence rises and falls, and when some sectors perform more strongly than others. However, what the latest lending figures demonstrate is that UK businesses continue to look for ways forward.
For me, that’s where lenders have an important role to play. We need to understand what a business is actually trying to achieve, work closely with the broker and structure finance around the real-world needs of the customer, rather than expecting the customer to fit the product.
