The latest Business Finance Review from UK Finance has shown that lending from high street banks to small and medium-sized enterprises (SMEs) in the UK has remained stable in the second quarter (Q2) of 2024, with a rise in finance approvals.
Gross lending for the period was broadly consistent, maintaining the upward trajectory seen in previous quarters, although still not reaching pre-pandemic levels.
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Gross lending in Q2 2024 was reported at approximately £4bn ($5.24bn), mirroring the figures from Q1 2024 and up from the £3.6bn recorded in the same quarter of the previous year.
The first half of 2024 demonstrated varied growth in lending across different sectors and regions, with the East Midlands and North West experiencing the strongest regional lending growth. Conversely, Yorkshire and Humberside were the only regions to report a decline.
The sectors of agriculture, construction, and real estate saw noticeable increases in lending compared to the previous year while lending to manufacturing and SMEs in the transport, storage, and communications sectors decreased.
Despite an uptick in insolvencies, the proportion of businesses affected remains lower than during the 2008-2009 downturn. This metric continues to be significant as the UK economy recovers from a mild recession at the end of last year.
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By GlobalDataLoan and overdraft approvals for small enterprises saw a rise in Q2 2024, with medium-sized enterprises also experiencing moderate increases.
Approval volumes across all sectors were higher than the same quarter a year prior, suggesting a positive shift following the pandemic-induced lending slump.
SME deposits have shown signs of stabilisation, with the total value of deposits exceeding £220bn.
This indicates that SMEs have maintained a substantial portion of the savings accumulated during the pandemic, with total deposits still about 14% higher than at the beginning of 2020.
The trend of declining cash deposits has been consistent across all economic sectors.
Repayment values have remained stable at around £6bn per quarter over the past year. With many SMEs still repaying Covid-19 loans, this level of repayments is expected to persist for the coming years.
UK Finance commercial finance managing director David Raw said: “With many businesses prioritising repaying Covid-19 loans, appetite for new finance remains subdued. However, finance is still there for SMEs where it is affordable.
“As the economy looks to turn a corner, the finance sector remains ready to provide it with the funds it needs to manage cash flow, and to invest and grow. Looking to the future, lenders can help businesses with planning their transition to net zero and any other long-term goals.”
