2024 saw signs of increased lending activity to SMEs by the main high street banks, with gross lending up 13% year-on-year to just over £16 billion, according to the latest UK Finance figures.
In each quarter of last year gross lending was up compared to the same quarter in the previous year. However, lending remains significantly below levels reported in the years prior to the pandemic.
There were notable increases in new lending to agriculture, real estate, health, and recreation, compared with 2023, whereas manufacturing, transport and storage saw falls in gross lending.
Net lending remained negative at around minus £7 billion, showing that businesses continue to pay back more than they borrow.
2024 also saw an increase in the number of new loans and overdrafts approved to SMEs. Loan approvals increased by 23% year on year to just under 45,000 and overdraft approvals increased by 47% to just under 59,000.
In an increasingly competitive market, 60% of SME lending now comes from outside of the main high street banks.
David Raw, managing director for commercial finance at UK Finance, said: “2024 was a more positive year for SMEs, with demand for new finance turning a corner compared to the previous year. Gross lending by the main high street banks was up and we also saw increases in the number of loan and overdraft approval numbers.
“SMEs are the backbone of the UK economy and banks have funding available to support them to invest and grow. We know the economic outlook remains challenging, but lenders are ready to support SMEs with their plans for 2025 and beyond and help them succeed.”
