
Small and medium-sized enterprises (SMEs) in the UK are increasingly turning to credit cards as a financing option due to restricted access to traditional financing, according to the 2025 Small Business Index Annual Report by Intuit Quickbooks.
This trend poses challenges for the UK economy, as SMEs are crucial for driving innovation, employment, and regional growth, according to an article in CityAM by Rob Burlison, the director of international corporate affairs at Intuit Quickbooks.
Developed with economist Ufuk Akcigit, the report reveals that SMEs are struggling to grow, create jobs, and invest in the future.
A significant challenge is limited access to financing as this can have a ripple effect on the economy, potentially affecting innovation, employment, and overall recovery.
Burlison said: “Collaboration among key leaders is essential to provide resources, share expertise, and develop policies that help small businesses overcome obstacles and drive sustainable growth.”
With UK employment declining for two consecutive years, businesses face mounting challenges in securing credit, a key driver of employment growth.
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By GlobalDataDespite these difficulties, certain sectors such as construction and professional services have added jobs. Wales, for instance, saw a modest increase of 400 jobs.
SMEs are said to play a vital role in the UK’s economic dynamism, and access to digital tools, trusted advisers, and alternative financing options can help business owners overcome these hurdles.
In 2024, 27% of small businesses used credit cards to fund operations, with 33% charging more than 25% of their monthly expenses to their cards.
While credit cards offer accessibility and flexibility, their high interest rates drain resources, limiting investment in long-term growth.
In addition, banks are becoming more selective with their long-term lending to small businesses amid navigating rising interest rates and more stringent monetary policies. This shift leaves SMEs with fewer options, potentially leading to reliance on more expensive debt or postponement of important investments.
In addition, the report highlights the impact of financial institutions’ ‘income gap’ on SME performance.
Banks with higher income gap scores provided more access to credit card financing, enabling businesses to hire and grow. Conversely, banks with lower income gap scores restricted financing, stifling SME development.