UK High Street Banks Increase SME Lending to £4.6bn in Q1 2025

Business lending by UK high street banks to small and medium-sized enterprises (SMEs) increased to £4.6 billion in the first quarter of 2025, marking the highest level since mid-2022 and the sixth consecutive quarterly rise. Lending growth was driven by sectors such as agriculture, manufacturing, wholesale and retail, and health, with lending to the smallest businesses (turnover up to £2 million) surging nearly 30% year-on-year and medium-sized business lending rising 9%. Loan and overdraft approvals also increased significantly, with new loan approvals up 37% and overdraft approvals up 8% compared to the previous year. Despite the growth, overall SME lending remains below pre-Covid levels, and the steady utilization rate of around 50% suggests businesses maintain some headroom in their existing credit facilities, often as a precaution against rising costs. David Raw, managing director of commercial finance at UK Finance, emphasized the importance of SMEs to the UK economy and advocated for making the government's Growth Guarantee Scheme permanent and expanding its budget to further support SME lending. Banks continue to work with businesses, government, and regulators to sustain lending supply and demand, enabling SMEs to invest and grow amid challenging economic conditions.