Gross lending to small and medium-sized enterprises (SMEs) in the UK has risen by 13% in 2024, reaching over £16bn ($20.7bn), according to a UK Finance report.
The report, which covers the finance needs of SMEs for both the fourth quarter of 2024 and the full year, highlighted a positive trend in lending activity from the main high street banks.
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In each quarter of 2024, gross lending was higher compared to the same quarter in 2023.
However, lending levels remain significantly lower than those seen before the pandemic.
In 2024, significant growth in lending was observed in sectors such as agriculture, real estate, health, and recreation compared to 2023.
Conversely, manufacturing, transport, and storage experienced declines in gross lending.
Despite this, net lending remained negative at approximately minus £7bn, indicating businesses are repaying more than they borrow.
The competitive lending market saw 60% of SME lending originating from sources outside the main high street banks.
Additionally, there was a surge in loan and overdraft approvals, with loan approvals increasing by 23% to nearly 45,000 and overdraft approvals rising by 47% to almost 59,000.
Overdraft utilisation showed little change, maintaining average rates from the past three years.
SMEs continue to maintain a buffer within existing facilities, with no significant change since the pandemic’s end.
Despite a slightly weaker start in 2024, client sales for the year totalled £313bn, slightly lower than 2023.
The stock of total advances at the end of last year was £21.2bn, up 4.4% from the previous year and just £0.5bn below the end of 2019.
UK Finance’s commercial finance managing director David Raw said: “2024 was a more positive year for SMEs, with demand for new finance turning a corner compared to the previous year. Gross lending by the main high street banks was up and we also saw increases in the number of loan and overdraft approval numbers.
“SMEs are the backbone of the UK economy and banks have funding available to support them to invest and grow. We know the economic outlook remains challenging, but lenders are ready to support SMEs with their plans for 2025 and beyond and help them succeed.”
