UK Finance has indicated that British high street banks extended more support to small and medium-sized enterprises last year, with total new lending climbing to £17.5 billion in 2025 from £16.1 billion in 2024. The latest figures from UK Finance show this marks the second consecutive annual increase, signaling renewed confidence among smaller firms despite a backdrop of economic uncertainty.
UK Finance further noted that the uptick was especially pronounced among the smallest businesses.
Lending to firms with annual turnover of up to £2 million surged by more than 25 per cent year-on-year, fueled by a steady rise in fresh loan approvals throughout 2025.
In contrast, credit extended to medium-sized companies grew more modestly at four per cent. Overall, new loans outperformed overdraft facilities in 2025, reversing the pattern observed the year before.
Quarterly momentum remained strong too. Gross business lending reached £4.6 billion in the final three months of 2025, delivering the eighth successive quarter of growth compared with the same period a year earlier.
This sustained expansion highlights how banks have continued to back SMEs even as broader economic pressures linger.
Regional distribution was notably balanced, with lending spread evenly across the United Kingdom.
This broad-based support underscores the banking sector’s role in fostering growth nationwide rather than concentrating in traditional hubs.
Meanwhile, existing overdraft usage stayed below pre-pandemic levels, indicating that many SMEs continue to hold financial buffers amid cautious demand and squeezed margins.
David Raw, Managing Director of Commercial Finance at UK Finance, welcomed the data. He emphasised that SMEs form a cornerstone of the national economy and that lenders are committed to helping them thrive.
“It was good to see gross lending increasing for another consecutive year of growth in 2025, driven by stronger demand from the smallest businesses,” Raw noted.
He added that, despite wider uncertainty, SMEs have kept their finances stable and that banks stand ready with available funding to help them invest, create jobs and drive expansion across the country.
The figures, compiled from major institutions including Barclays, Lloyds Banking Group, HSBC, NatWest Group, Santander UK and others operating in Great Britain and Northern Ireland, form part of UK Finance’s regular Business Finance Review.
They arrive at a time when policymakers and business groups alike are watching closely for signs of recovery in the SME sector, which employs millions and contributes significantly to GDP.
Analysts suggest the shift toward loans rather than overdrafts may reflect growing confidence among entrepreneurs to fund longer-term projects rather than short-term cash-flow needs.
With headroom still available on existing facilities, many firms appear well positioned to seize opportunities should economic conditions improve further in 2026.
For the United Kingdom’s SMEs, this second year of lending growth offers welcome reassurance.
It demonstrates that the banking industry remains open for business and ready to fuel the entrepreneurial engine that powers local communities and the wider economy. UK Finance concluded that as uncertainty persists, sustained access to finance will be crucial to translating this momentum into lasting recovery and job creation.