Government officials convene with heads of HSBC, Natwest, and Lloyds for discussions on small business loan support
Top bank honchos are hauled before ministers today following a government report that small businesses are struggling to obtain loans. The summit, chaired by the minister for small business Gareth Thomas, will feature executives from HSBC, Natwest, and Lloyds.
A Department of Business and Trade report in March revealed that the overall success rate for firms applying for bank financing dropped to a mere 40% - a steep fall from a 67% approval rate in 2018.
The Guardian broke the news about the impending meeting, which comes before the government concludes its review on small businesses' access to capital on May 8.
Research by the British Business Bank indicates that the SME lending landscape has undergone a drastic shift since 2019. In the past, the four biggest banks controlled 90% of SME loans. However, since 2024, alternative banks have been responsible for 60% of annual SME lending.
Allica Bank, a leading fintech catering to SMEs, has reported a "dramatic collapse" in SME lending amounting to up to £65bn over the last quarter-century. Allica Bank has advocated for long-term, sustainable reforms to rectify the SME financing market to fuel economic growth.
A representative from UK Finance, the industry body for banking and financial services, mentioned that the government is currently gathering opinions on financing for SMEs. They further stated that there is a range of financing and support options available for SMEs to help them prosper. To boost lending further, UK Finance suggests making the Growth Guarantee Scheme permanent and increasing the scheme's budget.
Chancellor Rachel Reeves is preparing to publish the Treasury's Financial Services Growth and Competitiveness Strategy on July 15, having engaged with high-ranking executives in the financial services sector since the start of the year to discuss growth stimulation.
A government spokesperson acknowledged the hardships that businesses have faced in recent years, highlighting the importance of small businesses to the economy. They added that the government is currently working with banks to develop opportunities for businesses to access the funding they need to expand, export, and enter new markets.
The decline in SME lending is primarily due to banks' tightened risk appetites, the preference for collateral-backed lending not fitting the current service-based SME landscape, skyrocketing rejection rates, and the substantial reduction in overdraft availability. The UK government is addressing the issue through reviews and proposals to strengthen lending programs, adjust regulatory barriers, and rejuvenate the SME credit market to support broad economic growth. This involves tackling both the supply- and demand-side constraints in SME financing.
- The government will review small businesses' access to capital on May 8, following a steep decline in the success rate for firms applying for bank financing, which has dropped to 40% as of March this year.
- The summit, chaired by the minister for small business Gareth Thomas, will feature executives from HSBC, Natwest, and Lloyds, who will answer for the struggles small businesses face in obtaining loans.
- The British Business Bank's research shows that the SME lending landscape has undergone a drastic shift, with alternative banks responsible for 60% of annual SME lending since 2024.
- Allica Bank, a fintech catering to SMEs, reported a "dramatic collapse" in SME lending, up to £65bn over the last quarter-century, and has advocated for long-term, sustainable reforms to rectify the SME financing market to fuel economic growth.
- UK Finance, the industry body for banking and financial services, stated that there are financing and support options available for SMEs, and proposed making the Growth Guarantee Scheme permanent and increasing the scheme's budget to boost lending further.
- The Treasury's Financial Services Growth and Competitiveness Strategy, published on July 15, will focus on growth stimulation, engaging with high-ranking executives in the financial services sector since the start of the year to discuss solutions for the decline in SME lending, primarily due to tightened risk appetites, preference for collateral-backed lending, skyrocketing rejection rates, and the substantial reduction in overdraft availability. The government aims to strengthen lending programs, adjust regulatory barriers, and rejuvenate the SME credit market to support broad economic growth, addressing both the supply- and demand-side constraints in SME financing.
