The latest figures from UK Finance indicate a robust start to 2024 for business lending from high street banks. In the first quarter (Q1) of the year, lending to small and medium-sized enterprises (SMEs) saw a notable 15% increase compared to the previous quarter. This surge represents an 8% rise compared to the same period in 2023, with lending surpassing £4 billion.
Regional and Sectoral Insights
While the growth in lending was widespread across the UK, certain regions experienced more significant increases. The East Midlands, London, and the North East led the charge, highlighting regional variations in business confidence and investment opportunities.
In terms of sectors, the data from UK Finance revealed that lending rose in eight out of the ten main sectors they cover. Notably, SMEs in education, real estate, professional services, and construction saw the largest increases in new lending. This sectoral growth underscores the diverse range of industries benefiting from improved access to finance.
Increased Approvals and Finance Value
The first quarter of 2024 also saw a significant rise in new finance approvals. Approvals were 27% higher than in the previous quarter, reflecting a 10% increase in the value of approved finance. This marks the highest number of approvals for new or increased loans and overdrafts since Q1 2022, suggesting a renewed confidence among SMEs and a willingness to invest in growth.
Stable Repayment Levels
Despite the increase in new lending, the level of SME finance repayments remained stable in the first three months of 2024. However, there were notable variations across different sectors. While repayments among manufacturers and SMEs in transport, storage, and communications have shown a downward trend in recent quarters, repayments in accommodation and food services have increased, particularly in the early part of this year.
Industry Perspective
David Raw, Managing Director of Commercial Finance at UK Finance, commented on the positive trends in SME lending:
“It is encouraging to see further signs that SME demand for finance is returning. As the economic outlook for SMEs improves, the financial services sector is helping businesses across the UK. Lenders remain ready to support SMEs who need and can afford finance.”
Raw also emphasized the importance of proactive financial planning for SMEs:
“Those concerned about their financial position or those planning for the future are always encouraged to have early conversations with their lender.”
Conclusion
The growth in SME lending by high street banks in Q1 2024 reflects a broader trend of increasing business confidence and economic recovery. As SMEs continue to navigate post-pandemic challenges, the support from financial institutions plays a crucial role in enabling their growth and sustainability. The increased lending and stable repayment levels are positive indicators that the financial health of SMEs is on an upward trajectory, providing a solid foundation for continued economic resilience and expansion.
