High street banks in the UK have reported an uptick in lending to small to medium enterprises (SMEs) in the first quarter of 2024, reports UK Finance.  

UK Finance, a trade association representing the banking and financial services sector, highlighted a 15% increase in lending to SMEs compared with the previous quarter. 

This amounted to slightly more than £4bn ($5bn), marking an 8% rise from the same period in 2023. 

According to UK Finance’s Business Finance Review, the growth in high street lending to SMEs was not uniform across the country, with the East Midlands, London, and the North East experiencing the highest increases.  

The data indicates a rise in lending across eight of the ten main sectors, with education, real estate, professional services, and construction SMEs receiving the largest boosts. 

These findings are based on contributions from a consortium of high street lenders, including Bank of Ireland, Barclays, Co-operative Bank, Danske Bank, First Trust, HSBC Bank, Lloyds Banking Group, RBS Group, Santander UK, Ulster Bank and Virgin Money, as well as the SME divisions of Barclays, HSBC Bank, RBS, and Santander UK. 

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In addition to the rise in lending, the first quarter of 2024 saw a 27% surge in new finance approvals compared with the previous quarter, marking the highest number of approvals for new or increased loans and overdrafts since the first quarter of 2022.  

The value of approved finance also climbed by 10%. 

Despite the growth in lending and approvals, SMEs have been reducing their cash deposit stocks since the beginning of 2024.  

By the end of the first quarter, overall deposits fell from a peak of just over £270bn in the fourth quarter of 2021 to £223bn in first quarter of 2024.  

However, the current deposit levels remain over 10% higher than pre-pandemic figures, indicating a buffer for SMEs. 

Repayment levels for SME finance have remained stable during the first three months of 2024, although there has been some sectoral variation over the past year.  

Manufacturers and SMEs in the transport, storage, and communications sectors have shown a downward trend in repayments, whereas the accommodation and food services sectors have seen an uptick, particularly in the first quarter. 

UK Finance managing director of commercial finance David Raw said: “It is encouraging to see further signs that SME demand for finance is returning. As the economic outlook for SMEs improves, the financial services sector is helping businesses across the UK. Lenders remain ready to support SMEs who need and can afford finance. 

“Those concerned about their financial position or those planning for the future are always encouraged to have early conversations with their lender.” 

The recent data from iwoca, a small business lender, highlighted the trend of growing demand for larger loans among UK SMEs.  

The iwoca Q1 2024 SME Expert Index revealed that 28% of finance experts reported an increase in requests for loans exceeding £100,000, a 56% jump from the previous year.