How are the banks helping to fund UK businesses?

Financial Services | Reports
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The recent Lloyds Bank advert creates a striking scene – a black horse running through history and supporting the public, businesses and communities.

But for many businesses post-2008 recession the money dried up from the banks and the black horse didn’t visit any longer – creating a proliferation of alternative finance companies that bridged the gap.

It was a catch 22 situation, with many blaming some banks for lending to businesses that weren’t fit for purpose and hence causing an economic condition that businesses argued they needed bank support to escape from.

Fast-forward to the present and lending from banks has slowed somewhat but it’s not the case that banks aren’t lending to businesses – the argument is that they are lending to ‘good’ businesses and funding sustainable growth.

Funding for growth

The most recent statistics from UK Finance show that the number of new loans to SMEs did increase in Q1 2018.

The statistics show that there were 73,971 new loan approvals to SMEs across the UK in Q1 2018, a slight increase from 72,272 in the first quarter of 2017. This uplift was helped by the number of new loan approvals in the production and manufacturing industries increase to 23,707, up from 22,868 in the same quarter last year.

In addition to this, total net deposits in the SME sector currently amount to £173bn, exceeding outstanding borrowing of £95bn. In March 2018 gross lending stood at 5,036bn for the year, down from 6,000bn in the previous year.

Commenting on the data, Stephen Pegge, Managing Director, Commercial at UK Finance said: “The number of new approved loans to SMEs grew slightly in the first quarter of the year, driven in part by increased demand in the manufacturing and production industries.

“SMEs should feel confident about applying for credit to grow and expand, with banks continuing to approve eight in 10 applications for finance.”

The banks

Regarding how the banks are supporting businesses with funding for growth, BLM spoke with Richard Bearman, HSBC UK’s Head of Small Business – one of the UK’s major retail banks.

He said: “HSBC launched a £10bn lending fund in 2017 to support SMEs in the UK, as part of a broader commitment to helping British businesses to realise their ambitions for growth.”

“We are continuing to see lending growth and in 2017 we approved over 90% of all lending applications”.


The UK banking sector has also seen a rise in ‘challenger’ banks entering the market and one which has done so is Oak North. Its Head of Debt Finance Ben Barbanel says the bank is committed lending to UK businesses and that challenger banks are helping to bridge the lending gap to UK businesses.

He commented: “Unlike many lenders who have retrenched from the SME lending market since the Brexit vote, we have continued to lend. Prior to the vote, our loan book stood at £98m. By the end of 2016, it had tripled to £300m. By the end of 2017, it had tripled once again to £1bn and by the end of this year, we’ll have a loan book of over £2bn.”

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