UK Bank Lending To Smaller Firms Rises

Lending by the United Kingdom’s high street banks increased for a second consecutive year in 2025, reflecting stronger borrowing activity among smaller companies and continued support from major lenders.

Momentum remained consistent throughout the year. In the final quarter of 2025, gross lending totalled £4.6bn, marking the eighth consecutive quarter in which lending volumes grew compared with the same period a year earlier. The strongest expansion occurred among companies with annual turnover of up to £2mn, where lending increased by more than a quarter year on year. The rise was supported by a steady increase in new loan approvals over the course of the year.

Borrowing by medium-sized companies also increased, though at a more moderate pace. Lending to these firms rose by four per cent compared with the previous year. The figures suggest that while financing demand strengthened across businesses of different sizes, the most significant acceleration occurred among the smallest companies.

The review also indicates that lending growth was broadly distributed across the United Kingdom. Activity was evenly spread among regions, suggesting access to bank finance reflected demand from companies operating across different local economies rather than being concentrated in a single area.

The composition of borrowing shifted during 2025. New loan approvals accounted for a larger share of financing than overdraft facilities, reversing the pattern seen in 2024. At the same time, the utilisation of existing overdraft limits remained below levels recorded before the Covid-19 pandemic.

Lower overdraft usage indicates many companies continue to maintain financial headroom as they navigate uncertain demand conditions and pressure on margins. According to UK Finance, lenders continue to make finance available, allowing businesses to access funding for investment and expansion while maintaining flexibility in managing their financial positions amid wider economic uncertainty.