Financing SMEs and Entrepreneurs 2026: United Kingdom
Table of contents
The developments in the SME finance markets in the United Kingdom in 2024 reflected the high level of uncertainty both domestically and abroad. Political uncertainty in the United Kingdom increased in the lead-up to the General Election in July. Similarly, political uncertainty in the United States rose ahead of the Presidential Election in November. Furthermore, the evolving conflicts in the Middle East and Russia’s aggression against Ukraine resulted in uncertainty about the economic outlook.
Gross flows of bank lending (excluding overdrafts), the main component of SME finance markets, rose by 5% in 2024 to GBP 62.1 billion in nominal terms. This was the third highest since records began in 2012 after 2020, which had largely been driven by government-guaranteed Covid-19 loans, and 2022. The rise in 2024 was largely due to increased lending by challenger and specialist banks. However, gross repayments exceeded gross lending for the fourth consecutive year, leading net lending to be negative. This is despite a fall in gross repayments of 5% to GBP 65.1 billion, the second consecutive fall from the record high in 2022. Nevertheless, the negative net lending of GBP 3 billion was narrower than in 2023 (GBP 9.3 billion). The outstanding stock of bank lending continued to fall in 2024 but remained relatively high at GBP 179.3 billion. The outstanding stock of SMEs’ loans decreased from GBP 184 billion in 2023 to GBP 179 billion in 2024, while new SME lending rose from GBP 59 billion to GBP 62.1 billion over the same time period.
Among the commonly used forms of alternative finance, the use of asset finance, invoice finance and asset-based lending rose in 2024. In contrast, that of overdrafts and equity finance fell. Asset finance new business rose by 0.9% to GBP 23.5 billion, a new record high. This was largely driven by increased new business in the business car finance, and commercial vehicle finance, sectors. Similarly, the use of invoice finance and asset-based lending rose by 5% to GBP 11 billion. However, the value of overdrafts was down by 2% to GBP 6 billion. The British Business Bank’s market intelligence suggests that smaller businesses found it harder to secure new, or increase existing, overdrafts than use other types of working capital finance.
Like overdrafts, the value of SME equity finance declined by 2.5% to GBP 10.8 billion, and the number of announced deals was down by 15.1% to 2048. Following unsustainable increases in valuations during 2021, higher inflation and a tighter monetary environment triggered a downturn in 2022, leading equity investment to revert to lower levels seen prior to the Covid-19 pandemic. The value of alternative finance lending from providers including marketplace, non-bank balance sheet and platform lenders is likely to have risen in 2024. Around GBP 3.3 billion of SME business lending via such providers has been reported. This is up from around GBP 2.5 billion by those providers that the British Business Bank has data for in 2023. The full year results for 2024 of some providers are yet to be published.
The United Kingdom government, the Department for Business and Trade and the British Business Bank will continue to work with a wide range of partners to support businesses across the United Kingdom as they look to invest and grow.
Note: * Break in data series and definition from 2016. **Most of the leasing and hire purchases reported for the United Kingdom comes from banks. Sources: Bank of England, British Business Bank, UK Finance BVA BDRC SME Finance Monitor, Beauhurst, Financing and Leasing Association, and the Insolvency Service
During another year of uncertainty in 2024, economic growth in the United Kingdom remained subdued but positive. 2024 posed significant challenges for the economy, with economic and political uncertainty, and a turbulent global economic environment. Following a brief technical recession in the second half of 2023, the economy showed signs of recovery, growing by 0.8% in the first quarter of 2024. However, growth across the rest of the year was relatively subdued, leaving annual real GDP for 2024 just 1.1% above 2023. This rate of growth was faster than in 2023 (0.4%) but below the average annual growth of 1.5% between 2013 and 2023.1
Real GDP growth in the United Kingdom in 2024 was also below a couple of Group of Seven (G7) peers, with the United States (2.8%) and Canada (1.5%) reporting stronger growth over the year. However, it was in line with France (1.1%). The latest available data for the first half of 2025 showed the economy generally remained subdued.
Business investment grew in 2024 but only modestly, with the pace remaining below the pre–2008 global financial crisis trend. Across 2024 business investment was up 2% from 2023,however there was considerable volatility within the year. Business investment was broadly flat in the first quarter but grew in the following two quarters before contracting in the final quarter of the year.2
One explanation for the business investment growth over 2024 is the stabilisation of the Bank of England (BoE) Bank Rate in the early part of the year. This followed Bank Rate rising from 0.10% in December 2021 to 5.25% in August 2023. The BoE subsequently started to reduce Bank Rate in August 2024, with a cut to 5% that month. This was followed by Bank Rate being reduced to 4.75% in November. The BoE continued to gradually reduce Bank Rate during 2025.
The introduction of full expensing, which allows companies to claim 100% of qualifying machinery and plant investments, may also have contributed to the business investment growth in 2024.3 4 The latest available data for the first half of 2025 showed business investment was mixed, with strong growth in the first quarter followed by a contraction in the second.
Business confidence remained weak in 2024. The Federation of Small Businesses (FSB) small business confidence index rose in the first quarter of 2024 and was in positive territory for the first time in two years. However, the index subsequently fell for three consecutive quarters, leading confidence in the fourth quarter of 2024 to be the lowest since the Covid-19 pandemic. This followed the slow economic growth observed in the second half of the year. Additionally, the FSB suggested that expectations regarding increased business taxes and employment costs may have contributed to the pessimism observed in the fourth quarter of 2024.5
The British Chambers of Commerce (BCC) Quarterly Economic Survey showed a slightly more positive outlook in the first half of 2024, with an increase in the net balance of businesses expecting turnover to grow. However, like the FSB results, this optimism was followed by a significant decline in the second half of 2024, especially in the fourth quarter.6
Inflation eased markedly during 2024. The annual rate of headline inflation, as measured by the consumer price index (CPI), in September 2024 was 1.7%. This was down from 4% in December 2023 and well below the peak of 11.1% in October 2022. The easing was largely driven by the continued recovery of the global supply chain, which led to falls in the prices of key global commodities including natural gas. However, inflation picked up during the fourth quarter of 2024, with the annual rate reaching 2.5% in December. This was mainly due to increased global uncertainty as well as crude oil and gas prices starting to rise again. The latest available data for the third quarter of 2025 showed inflation continued to be relatively high.7
Both core and services inflation were a little higher than the headline rate during 2024, suggesting persistent underlying domestic pressures. The annual rate of core inflation, which excludes the volatile energy and food components of the CPI, was 3.2% in December 2024. The latest available data for the third quarter of 2025 showed core and services inflation were still comparatively elevated.
Job vacancies fell during 2024, but real regular pay increased. The number of vacancies continued to fall over the year, dropping to 812 000 in the three months to December 2024. The latest available data for the third quarter of 2025 showed job vacancies continued to trend lower while the unemployment rate rose but remained relatively low. Annual wage growth eased for most of 2024 but remained relatively strong. Real regular pay grew 2.6% in the three months to December 2024. This was the strongest growth since the three months to September 2021 (3.1%). Both nominal and real regular annual pay growth picked up in the fourth quarter of 2024.
There were 5.5 million private sector businesses in the United Kingdom at the start of 2024, according to business population estimates from the Department for Business and Trade (DBT). This was down 1.0% from 2023. The main driver in absolute terms was a fall in the number of businesses with no employees, which declined by 38 320,which was equivalent to a fall of 0.9%. The number of businesses with no employees totalled 4.1 million, which comprises around 74.0% of businesses, 16.0% of employment and 6.9% of turnover in the private sector.
The fall in the number of businesses without any employees resulted from a decrease of 43 000 (1.5%) unregistered businesses, which was partially offset by an increase in non-employing registered businesses of 5 000 (0.4%). This followed an increase in the previous year, which was driven by a 3% rise in unregistered zero employee firms at the start of 2023 compared to the previous year.
The number of private sector businesses with employees in 2024 was down 1.2% from 2023. The breakdown by business size showed the largest decrease was in the number of micro firms (-1.4%), which have between one and nine employees and account for 81.4% of all employers in the private sector. The second largest decrease was among small firms (-1.3%). Small firms have between 10 and 49 employees and account for 15.4% of all private sector employers. Meanwhile, there was an increase in the number of private sector medium and large businesses in 2024. The breakdown by business size showed the largest increase was in the number of large firms (3.6%), with more than 250 employees. This was followed by medium-sized businesses (2.3%), which employ between 50 and 249 staff.
Number of firms, thousands 2024 (LHS), percentage change 2023-24 (RHS)
Source: DBT, Business Population Estimates 2024
The contribution made by those businesses with employees to the stock of private sector firms, employment and turnover varies substantially by the size of the employer i.e. headcount. In 2024, micro firms comprised around 21.1% of all private sector businesses. This compared to small businesses accounting for 4.0%, while medium-sized and large businesses comprised only 0.7% and 0.2%, respectively. However, in general, the ratio of employment and turnover per firm increases in line with the size of the firm’s workforce. In 2024, micro firms comprised 15.2% of employment and 12.9% of turnover. This compared with large businesses accounting for 40.0% of employment and 47.8% of turnover.
Percentage share of firms, employment and turnover 2024
Source: DBT, Business Population Estimates 2024
Gross bank lending increased moderately in 2024. BoE data showed nominal gross bank lending excluding overdrafts to SMEs in 2024 totalled GBP 62.1 billion. This was a nominal increase of 5% from 2023. The nominal value of gross lending was the third highest since records began in 2012 after 2020 (GBP 105 billion), which had largely been driven by government-guaranteed Covid-19 loans, and 2022 (GBP 65.1 billion).8
While gross lending rose 5% in nominal terms, when accounting for inflation it was up only 2%. The value of gross lending in real terms was GBP 60.4 billion, which was the fourth lowest on record. Government-guaranteed lending drawn down from banks in 2024 totalled GBP 0.6 billion. Of this, 74% was term loans. The GBP 0.6 billion was the equivalent of 1% of total gross bank lending for the year. The government-guaranteed lending comprised drawdowns under the third variant of the Recovery Loan Scheme (RLS 3) in the first half of 2024 and the Growth Guarantee Scheme (GGS) in the latter half.9 10
The GBP 0.6 billion of government-guaranteed lending drawn down from banks in 2024 was the highest since 2022 (GBP 1.4 billion). However, it remained well below the figure in 2020 (GBP 56.7 billion), which comprised drawdowns under the Coronavirus Business Interruption Loan Scheme (CBILS) and the Bounce Back Loan Scheme (BBLS).
The quarterly breakdown showed that during 2024 nominal gross lending increased in the second and fourth quarters but was broadly flat in the first and third quarters of the year. The pickup in the fourth quarter (12%) was the largest in just over two years. This led gross lending to reach GBP 17.2 billion, the highest quarter since the third quarter of 2022 (also GBP 17.2 billion).
The annual breakdown by sector shows nominal gross lending to SMEs in the real estate (RE) sector in 2024 was GBP 18 billion.11 This was up 19% from 2023 and the highest since records for RE lending began in 2016.
While nominal gross lending to the RE sector increased sharply in 2024, it was broadly flat to all other sectors in aggregate. Consequently, RE lending as a share of total gross lending reached 29%. This was up from 26% in both 2022 and 2023 and the highest on record. The British Business Bank’s market intelligence is that the recent increase in lending to the RE sector has been driven by actual and expected falls in the Bank Rate. This reflects that the demand from businesses in the RE sector for lending is typically more sensitive to changes in Bank Rate than that from others. As RE projects are often heavily reliant on debt financing, higher interest rates increase the cost of servicing the debt and erode profit margins, and vice versa. The latest available data for the first half of 2025 showed gross bank lending to SMEs was broadly flat.
Quarterly flow of gross lending GBP billion (LHS), percentage SME share of total lending (RHS)
Source: Bank of England Bankstats, 2025
Gross repayments fell in 2024 for the second consecutive year. BoE data showed nominal gross repayments by SMEs in 2024 totalled GBP 65.1 billion. This was down 5% from 2023 and the second consecutive fall. In nominal terms this was still the fourth highest on record after 2022 (GBP 73.5 billion), 2023 (GBP 68.5 billion) and 2021 (GBP 65.7 billion). However, in real terms, gross repayments were down 8% from 2023 and the value of gross repayments (GBP 63.3 billion) was the second lowest on record after the joint low in 2013 and 2014 (both GBP 59.3 billion).
The fall in nominal gross repayments for the second consecutive year largely reflects that the one-year holiday on paying interest and repaying the principal on BBLS ended in late 2022. As a result, by the end of 2022 all those smaller businesses that had drawn down BBLS had started paying interest and repaying the principal or paid the facilities back in full. The Department for Business and Trade data as of 31 December 2024 also showed the majority (70%) of BBLS facilities drawn down from lenders including banks were either fully repaid (15%) or on schedule (55%).12 The latest available data for the first half of 2025 showed gross repayments continued to trend lower.
The BoE measure of nominal net lending in 2024 was a negative GBP 3 billion. This was the fourth consecutive year of negative net lending but the narrowest over that period. It was also much narrower than the negative net lending in 2023 (GBP 9.3 billion), the largest on record. In real terms, net lending in 2024 was a negative GBP 2.9 billion. The latest available data for the first half of 2025 showed net lending had turned positive.
Quarterly gross lending and repayments GBP billion (LHS), quarterly net lending GBP million (RHS)
Source: Bank of England Bankstats, 2025
The outstanding stock of bank lending to SMEs continued to fall during 2024 but remained relatively high. BoE data showed the outstanding stock of bank lending in the fourth quarter of 2024 was GBP 179.3 billion. This was down 3% from the same quarter in 2023. It was also below that in corresponding quarters of 2020, 2021 and 2022. However, it remained above that in the fourth quarter of every year from 2012 to 2019. The fall in 2024 is in line with the BoE agents, based on discussions with at least 700 firms across the United Kingdom, reporting during the year their contacts were generally deleveraging and keen to reduce debt.13 14 The latest available data for the first half of 2025 showed the outstanding stock of bank lending to SMEs continued to fall in the first quarter of the year before rising sharply in the second. The BoE attributed the rise in the second quarter to an update in the reporting population.
Quarterly stock of lending, GBP billion (LHS), percentage SME share of total lending (RHS)
Source: Bank of England Bankstats, 2025
The value of deposits held by SMEs with major banks continued to fall in 2024 but remained relatively high. UK Finance data for the seven largest banks in the United Kingdom showed the total average value of deposits in 2024 was GBP 224 billion.15 This was down 8% from 2023, the third consecutive annual fall. However, the value was the fifth highest since records began in 2012 and remained above that in every year from 2012 to 2019. The fall in the value of deposits in 2024 is consistent with the BoE’s agents reporting during the year that their contacts were generally using their own cash to fund investment rather than borrowing. The latest available data for the first half of 2025 showed the value of deposits continued to fall.
Similarly, the value of overdrafts used by SMEs fell in 2024. UK Finance data for the seven largest United Kingdom banks showed the total average value of overdrafts used by SMEs in 2024 was GBP 6 billion. This was down 2% from the previous year and the second lowest on record after 2021 (GBP 5.9 billion). The Bank’s market intelligence is that smaller businesses have recently found it harder to secure new, or increase existing, overdrafts than to use other types of working capital finance such as credit cards. The latest available data for the first half of 2025 showed the value of overdrafts trended lower.
Business deposits, GBP billion (LHS), business overdrafts, GBP billion (RHS)
Source: UK Finance, 2024
Demand-side surveys show that, in overall terms, the use of external finance by SMEs fell in 2024. The UK Finance BVA BDRC SME Finance Monitor showed in 2024 an annual average of 39% of SMEs reported they were currently using external finance. This was two percentage points below 2023 (41%) and the lowest since 2022 (36%). The fall was largely driven by declines in the use of core products i.e., bank overdrafts, credit cards and bank loans/ commercial mortgages. In contrast, the use of loans or equity from directors/ family/ friends was marginally higher while that of leasing/ hire purchase/ vehicle finance was steady. The latest available data for the first half of 2025 showed the use of external finance was slightly higher at 42%.16
All data as at year end, Q1-Q4, demand side survey, percentage of all SMEs
Note: (1) The wording for these forms of finance changed substantially over time, estimates are for combined options.
Source: UK Finance BVA BDRC, SME Finance Monitor, Q4 Reports 2012-2023 for historic data and Q4 2024 Report, p. 140
The share of SMEs applying for bank facilities rose marginally in 2024. This followed a sharp decline in 2022 and marginal fall in 2023. The proportion that applied for new, or to renew existing, bank loans or overdrafts rose to 3% from 2% in 2023. This is the highest since 2022 (also 3%) and substantially below the level observed when records began in 2011 (12%). The rise was driven by the proportion that applied for a new facility increasing to 3%, which was also the highest since 2022. This followed the proportion rising sharply in 2020 to 6% and climbing in 2021 to 7%, the joint highest on record (with 2011), because some of the SMEs that used the Covid-19 government loan schemes were borrowing for the first time. Following this, there was a sharp decline in 2022 and a marginal fall in 2023.
Percentages, all data as at year end, Q1-Q4, demand side survey
Note: (1) Applications for any new/renewed facility (loan/overdraft) in previous 12 months, estimated annual average in each year, Q1-Q4. Applications for new and renewed facilities are not necessarily mutually exclusive (i.e., SMEs can apply for a new and renewed facility in same year), but slight variations are probably due to rounding issues. Questionnaire changes over the 2018 period may cause slight variation in the applications data.
Source: UK Finance BVA BDRC, SME Finance Monitor, Q4 Reports 2012-2017 for historic data, British Business Bank calculations for 2018-2022, and BVA BDRC analysis for 2023 and 2024.
The percentage of SMEs that reported they were happy to use finance to help grow their business rose in the second half of 2024 to 41% from the first half of that year (36%). This was the highest since the second half of 2016 (43%) and only slightly below when records began in the first half of 2015 (45%). Similarly, the percentage of SMEs stating they would rather accept a slower rate of growth than borrow rose marginally in the second half of 2024 to 79% from the first half of the year (78%). At the time of writing the latest data on the percentage of SMEs reporting growth plans based on what they can afford to self-fund was for the first half of 2024. This showed the percentage fell slightly to 85% from the second half of 2023 (87%) but remained higher than when records for that measure began in the first half of 2016 (80%).
Data as at end of each half year, Q1-Q2 and Q3-Q4, demand side survey, percentage of all SMEs.
Source: UK Finance BVA BDRC, SME Finance Monitor, Q4 Reports 2012-2023 for historic data and Q4 2024 Report, pp. 196.
The percentage of secured bank loans to SMEs in 2024 was 41%, up 6 percentage points from 2023. This is in line with the pre-pandemic level observed in 2018 (41%), suggesting the impact of pandemic-related activities on this indicator has now subsided. It is also substantially higher than in 2020 (15%), 2021 (22%) and 2022 (22%), which likely reflects the unsecured nature of the previously available government guarantee schemes related to the pandemic (BBLS and CBILS).
All data as at year-end, demand side survey, percentage of all SMEs
Note: business loans, 2011 and 2012 Q1-Q4; 2013 onwards all data in Q4 in each year for borrowing events in previous 18 months.
Source: UK Finance BVA BDRC, SME Finance Monitor, Q4 Reports 2012-2021 for historic data and BVA BDRC analysis for 2022-2024
Reports indicate that smaller businesses faced tight credit conditions during 2024. The BoE agents reported a mild improvement in the supply of credit during the year. While banks continued to compete to lend to the most creditworthy businesses, access to finance was a challenge for SMEs. This was particularly the case for SMEs that presented a greater credit risk due to low profitability, limited security or high debt. Many SMEs reported they did not meet the major banks’ credit criteria and found it easier to access credit from challenger banks and non-bank lenders, which were more willing to lend at high interest rates. Overall, small firms reported the supply of credit was tighter than prior to the Covid-19 pandemic. The latest available data for the third quarter of 2025 showed the BoE agents continued to report a gradual improvement in the availability of credit.
Borrowing costs reached record highs during the first half of 2024. BoE data showed the weighted average interest rate on all new loans to SMEs i.e., fixed and floating, in the first quarter of the year was 7.51%. This was the highest since records began in 2016. The interest rate subsequently reached a new record of 7.65% in the second quarter of 2024, before falling in the third and fourth quarters to 7.35% and 7.16% respectively.
The outlook for borrowing costs improved as 2024 progressed. This was largely due to inflation returning to near the BoE’s 2% target in the middle of the year, which led to widespread expectations that Bank Rate had peaked and was likely to start falling later in 2024. The latest available data for the second quarter of 2025 showed the interest rate fell further to 6.61%.
Monthly average interest rates to SMEs and PNFCs
Source: Bank of England Bankstats, 2025
Financing and Leasing Association (FLA) data showed SME asset finance new business in 2024 was GBP 23.5 billion in nominal terms. This was up 0.9% from 2023 and the highest since records began in 2011following an increase of 6.9% in 2023. This was the fourth year in a row the series had grown after falling in 2020 due to the Covid-19 pandemic. The asset finance new business provided to SMEs in 2024 was 13.9% higher than the pre-pandemic total in 2019.
Growth in new business was uneven across 2024. The first quarter saw new business 5% lower than in first quarter of 2023. This was in part due to a record March in 2023 as businesses invested ahead of the end of the super-deduction allowance.17 The second quarter was initially more positive on the back of improved economic data. The FLA’s second quarter 2024 Industry Outlook Survey showed almost two-thirds of asset finance respondents expected some increase in business investment over the following 12 months. This appeared to be borne out by an upturn in new business, which grew by 6% in the second quarter. However, June saw a decrease, which the FLA attributed in part to businesses “delaying investment plans until after the General Election and in anticipation of a cut in Bank Rate.”
Growth in the third quarter moderated again, up by 2% on the same quarter in 2023. However, this masked an up and down few months. Businesses appeared to have been reacting to first the Labour victory and the hope of reduced uncertainty, and then to the likelihood of tax increases. Furthermore, fluctuating expectations around interest rates may also have played a part, and the fourth quarter of 2024 showed growth of only 1% compared with the same quarter in 2023. The FLA’s fourth quarter 2024 Industry Outlook Survey suggests that “despite the lower inflation and interest rate environment, uncertainty about demand and pressure on net margins have hit business confidence and investment intentions. Nevertheless, almost two-thirds of asset finance respondents expected some increase in new business over the next year.”
The successes and challenges of 2024 were largely driven by vehicles. The business car finance and commercial vehicle finance sectors reported new business up 1% and 10% respectively for 2024, compared to 2023.
Away from vehicle asset finance, the lack of investment in other assets reflects a range of challenges that businesses have faced over the last few years which have resulted in low business investment. While the start of 2024 saw the economy return to growth following the technical recession in the second half of 2023, businesses still had to deal with low demand and a slowing economy as the year progressed, relatively high input prices and the considerable uncertainty present throughout most of the year.
The cost of funding also made conditions challenging for many non-bank lenders. The share of asset finance provided by non-bank lenders stood at 37% in 2024, unchanged from 2023. While interest rates had decreased slightly as inflation returned to near the BoE’s 2% target, funding costs for non-bank lenders remained above historical averages. This resulted in many non-bank lenders having to choose between losing business or reducing their margins.
The latest estimates for the first nine months of 2025 indicate SME asset finance new business totalled GBP 17.3 billion. This was up 3.5% from than in the same period in 2024.
In GBP billion
Source: British Business Bank estimates based on Finance & Leasing Association (FLA) data.
The value of advances to smaller businesses increased in 2024. British Business Bank calculations based on UK Finance data showed outstanding advances in invoice finance and asset-based lending (factoring and invoice discounting) to SMEs averaged GBP 11.0 billion in 2024. This was up 5% from 2023 but remained below 2019 (GBP 11.8 billion). Similarly, advances to businesses overall rose by 5% in 2024, which is the same in percentage terms as that to SMEs.
In GBP billion, percentage share of SME lending
Note: * Clients with turnover below GBP 50 million, yearly figures as at Q4.
Source: UK Finance data and British Business Bank calculations
British Business Bank analysis of Beauhurst data shows that United Kingdom smaller businesses raised GBP 10.8 billion of investment in 2024. This was a 2.5% decline compared to 2023 and significantly below the outlier years of 2021 (GBP 20.6 billion) and 2022 (GBP 17.4 billion). While this demonstrates a continuation of subdued levels of market activity since the beginning of 2023, it was still the fifth highest year on record for investment value and above the totals seen in the years before the Covid-19 pandemic. The market was less resilient on a deal numbers basis in 2024, with the number of equity deals falling by 15.1% to 2 048. This total is down by a third (33.9%) from its peak in 2021 and is now in line with levels last seen in 2018. The contraction was driven by a particularly weak second half of the year during which there was heightened market uncertainty, resulting in investment decisions being paused and funding existing portfolios being prioritised over new opportunities.
Following unsustainable increases in valuations during 2021, higher inflation and a tighter monetary environment triggered a downturn in 2022. Since then, equity investment has reverted to lower levels seen prior to the pandemic. The amount invested in 2024 is in line with the market’s ten-year average of GBP 10.4 billion. However, this recent period has also seen a trend towards fewer, larger deals, with the number of deals currently sitting 9.6% below the annual average over the past decade of 2 266 deals.
2024 was a year of two halves for the equity market. During the first two quarters there was GBP 3.5 billion and GBP 3.3 billion of total investment deployed respectively, the highest half year total since the second half of 2022. However, investment values declined by 41.8% in the final two quarters of 2024 to around GBP 2 billion per quarter. There was a similar story throughout 2024 on a volume basis, with the number of deals declining by 32.5% between the first and second half of the year. A total of 441 equity deals were recorded in the fourth quarter, a slight recovery from the previous quarter which saw 384 announced deals. However, these figures were significantly below the first quarter and second quarter totals of 608 and 615 deals respectively. For comparison, there was a quarterly average of 758 deals during the market peak of 2021-2022, and an average of 563 during the preceding 2018-2020 period.
The most recent data for the first quarter of 2025 indicates that there has been a slight upturn in investment values, while the number of deals remains historically low (see the Small Business Equity Tracker 2025 for more information).18
Number of deals, value in GBP million
Note: * average of disclosed investment amounts only.
Source: British Business Bank analysis of Beauhurst data.
British Business Bank analysis of Beauhurst data also shows the drivers of the fall in United Kingdom SME equity finance in 2024 was venture and growth capital. Venture stage investment fell by 5% to GBP 4.2 billion in 2024. Meanwhile, growth stage investment fell by 8% to GBP 4.6 billion in 2024. In contrast, seed stage investment rose by 18% to GBP 2.0 billion in 2024.
By stage of development, in GBP million
Note: * Average value will not equal total investment/number of companies, not all funding amounts are known, and some companies receive multiple funding rounds in a year. ** Average per investment. *** Values for total investment may not sum due to rounding.
Source: British Business Bank analysis of Beauhurst data.
The value of alternative finance lending from providers including marketplace, non-bank balance sheet and platform lenders is likely to have risen in 2024. Larger alternative lenders appear to have had a mostly positive year in 2024. At the time of writing, around GBP 3.3 billion of SME business lending via alternative finance providers has been reported. This compares to around GBP 2.5 billion lent by the alternative lenders that the British Business Bank has data for in 2023.
In GBP billion
Note: * In 2020 this table was titled “Peer-to-peer business lending and invoice finance in the United Kingdom”; ** 2024 data is only partial, at the time of writing not all lenders have produced full year data for 2024.
Source: British Business Bank analysis of finance provider submissions and public filings
More than one-third (39%) of SMEs reported receiving trade credit in 2024. This, with 2023, was the joint highest since records began in 2014. The record high use highlights the importance of trade credit as a source of short-term finance for SMEs, helping to sustain business-to-business trade, cashflow and liquidity. By size of firm (headcount), the percentage of SMEs purchasing products and services using trade credit was highest among medium-sized firms (79%), followed by small firms (76%) and micro firms (53%) The lowest use continued to be among firms with no employees (32%). The most recent data for the first and second quarters of 2025 showed the share of SMEs using trade credit was broadly stable.
Percentage of SMEs, by headcount, demand side survey
Source: UK Finance SME Finance Monitor, Q4 Reports 2012-2023 for historic data and Q4 2024 Report, p. 162
The percentage of SMEs reporting access to finance as a major obstacle to business operations rose marginally in 2024 to 9%. This was up marginally from 8% in the previous year and the highest since 2013 (10%). Similarly, the proportion of SMEs reporting issues with cash flow or late payments increased sharply in 2024 to 22%. This compares to 15% in 2023 and was the highest since records began in 2012.
Percentage of SMEs, by headcount, demand side survey
Note: SMEs providing an impact score between 8-10 out of 10.
Source: UK Finance SME Finance Monitor, Q4 Reports 2012-2023 for historic data and Q4 2024 Report, p. 316
The number of company insolvencies in the United Kingdom fell in 2024 to 25 421. This was down 4% from 2023 (26 615), which was the highest since records began in 2000. It followed large rises in the previous three years. By United Kingdom nation, the fall in 2024 was solely driven by a decline in England and Wales. The breakdown for England & Wales showed that a fall in the number of creditors’ voluntary administrations was only partly offset by a rise in compulsory liquidations. The latest data for the third quarter of 2025 showed the number of company insolvencies continued to trend lower but remained relatively high.
Number, not seasonally adjusted
Note: The method for estimating insolvencies was revised in January 2018. SME bankruptcies are proxied by total business insolvencies.
Source: Insolvency Service, Companies House.
The British Business Bank (the Bank) is an economic development bank established by the United Kingdom Government in November 2014. The Bank’s mission is to drive sustainable growth and prosperity across the United Kingdom, and to enable the transition to a net zero economy, by improving access to finance for smaller businesses. It designs, delivers and manages access to finance programmes and funds for smaller businesses across the United Kingdom that address gaps in the market. As well as increasing the supply and diversity of both debt and equity finance, the Bank raises awareness of the finance options available to smaller businesses. Over the decade to 2024 the Bank helped finance flows of more than GBP 32 billion to reach smaller United Kingdom businesses. These flows have benefited around 209 000 businesses, supporting just under 2.3 million existing jobs.19
The Government launched the first iteration of the Recovery Loan Scheme (RLS 1), a government-backed loan scheme designed to support access to finance for United Kingdom-based businesses with a turnover of up to GBP 45 million per annum seeking to invest and grow, in April 2021. RLS 1 closed to new applications at the end of 2021. The second iteration of the scheme (RLS 2) ran from January to June 2022 (see the United Kingdom profile chapter in the 2024 OECD Financing SMEs and Entrepreneurs Scoreboard for more information).20
The third iteration of the scheme (RLS 3) opened for applications in August 2022. Under RLS 3, the Government provided the accredited lender with a guarantee of 70% against the outstanding facility balance. Also, the borrower remained 100% liable for the debt. The maximum facility size available was GBP 2 million for borrowers outside the scope of the Northern Ireland Protocol while those in the scope of the Protocol could borrow up to GBP 1 million.21 22 RLS 3 was due to end in June 2024, but the Government announced in the 2024 Spring Budget it would be extended until March 2026 and renamed the Growth Guarantee Scheme (GGS).
GGS launched in July 2024 and offers a wide range of products supported by different lenders including term loans, overdrafts, asset finance, invoice finance and asset-based lending. At the time of writing a pilot, known as ‘Green GGS’, is being run to enhance the ability of the scheme to support businesses that are investing in sustainable assets. The Government subsequently announced in April 2025 that GGS will provide approximately GBP 500 million of additional lending capacity to help more smaller businesses across the United Kingdom. The extra funding is aimed at smaller businesses that may need support with cashflow issues due to changes in global tariff rates.23
When taken together, RLS 3 and GGS accounted for a total of 8 465 loans with a value of around GBP 1.2 billion drawn down in 2024. This was up from 2023, when 4 608 loans worth GBP 0.8 billion were drawn down under RLS 3.
Between April 2021 and the end of 2024, 33 511 loans with a total value of GBP 6.4 billion were drawn down under RLS 1, RLS 2, RLS 3 and GGS.
Number, value in GBP million
Source: British Business Bank Note: 2021 is RLS 1 only; 2022 RLS 1 and RLS 2, 2023 RLS 3 only, and 2024 RLS 3 and GGS
As previously mentioned, government-guaranteed facilities accounted for a total of 8 465 loans with a value of around GBP 1.2 billion drawn down in 2024. This was the highest since 2022, when 10 591 loans worth GBP 2.5 billion were drawn down. This compares to approximately 1.5 million loans with a value of GBP 61.0 billion drawn down in 2020. The figures for 2020 include drawdowns under EFG, CBILS and BBLS. The total EFG drawdowns in the first three months of 2020 were relatively small, comprising 499 loans worth GBP 52 million.
Number, value in GBP million
Source: British Business Bank.
A key development in 2024 was the Government announcing that the Bank, subject to regulatory approval, will establish a new investment vehicle called the British Growth Partnership (BGP). The BGP will ‘crowd in’ United Kingdom pension fund and other institutional investment into venture capital funds and innovative businesses. The initial fund will seek to raise hundreds of millions of pounds, including a commitment from the Bank, to invest in some of the highest potential opportunities in the Bank’s venture capital pipeline.24
The United Kingdom’s Financial Conduct Authority (FCA) subsequently in May 2025 granted regulatory approval to the Bank’s third-party arm, BBB Investment Services Limited, to provide investment services to clients. This is an important first regulatory step in the preparation for launch of the BGP.25
Another development in 2024 was the Bank completing its GBP 250 million investment under the Long-Term Investment for Technology and Science (LIFTS) initiative to create a GBP 500 million investment vehicle that is accessible to pension funds and other institutional investors (see the United Kingdom profile chapter in the 2024 OECD Financing SMEs and Entrepreneurs Scoreboard for more information on LIFTS).26 The Bank’s commitment will be matched by GBP 250 million of pension investment from Phoenix Group, the United Kingdom’s largest long-term savings and retirement business. Phoenix’s investment will be made through its new private markets joint venture with Schroders, Future Growth Capital. This followed the approval from the FCA to launch the first ever Long-Term Asset Fund dedicated to United Kingdom venture capital. 27
The Bank continued to support SMEs through a variety of existing programmes in 2024. These included ENABLE Programmes (ENABLE Guarantee, ENABLE Build and ENABLE Funding), the Nations and Regions Investment Funds (NRIF), British Patient Capital (BPC) and British Business Investments (BBI).
Within the ENABLE Programmes, the Community ENABLE Funding programme opened to applications in 2024. The programme aims to help social impact ‘non for profit’ lenders access more funding and reduce financial constraints. This means they can better support SMEs, especially those in underserved communities, by increasing the availability of finance.28
Within NRIF, the second Northern Powerhouse Investment Fund (NPIF) and Midlands Engine Investment Fund (MEIF) launched in 2024. Both build upon the success of their original respective funds. NPIF II and MEIF II aim to drive sustainable economic growth by supporting innovation and creating local opportunities for new and growing businesses in the North of England, and the Midlands, respectively.29 30
As of March 2024, BPC had made total commitments of GBP 2.3 billion since its inception in 2014 across 80 fund commitments, 10 co-investments, and 18 Future Fund: Breakthrough deals. This supported 44 fund managers and a total of 1 360 companies across BPC’s funds and direct portfolio.31 Similarly, BBI had made total commitments of GBP 4.4 billion since its inception in 2014.32
Separately, a series of United Kingdom tax reliefs continued to encourage investments in small unquoted companies carrying on a qualifying trade in the United Kingdom. HM Revenue & Customs (HMRC) data shows 3 780 companies raised a total of GBP 1.6 billion of funds under the Enterprise Investment Scheme (EIS) in 2023-24. This was the lowest number of companies since 2020-21 (3 770). Similarly, the total amount raised was the lowest since 2012-13 (GBP 1.0 billion).
The number of raises and the value of investment decreased by 11% and 20% respectively on 2022-23. Since the EIS was launched in 1993-94, 38 500 companies have received investment and GBP 31.5 billion of funds have been raised (noting that companies can raise funds in more than one year).
Since the Seed Enterprise Investment Scheme (SEIS) was launched in 2012-13, 20 350 individual companies have received investment through the scheme and GBP 2.1 billion in investment has been raised. In 2023-24 SEIS recorded 2 290 companies raising total investment of GBP 242 million. Compared to 2022-23, the number of raises rose by 25% and the value of funds was up by 51%. As with EIS, these numbers are provisional and likely to be revised upwards as more returns are received. Based upon historic revisions of the data, the consistently increasing numbers of raises and value of funding confirm the continued importance of business angel funding to smaller United Kingdom companies.
Number of raises and value, GBP million
Note: * Per raise.
Source: HM Revenue & Customs (HMRC).
Note: *In 2020 this table was titled "Peer-to-peer business lending and invoice finance in the United Kingdom"; **2024 data is only partial, at the time of writing not all lenders have produced full year data for 2024; ***Lending is via marketplace lenders or non-bank balance sheet lenders.
Source: See Table 1
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← 1. Office for National Statistics, GDP quarterly national accounts, UK: April to June 2025 GDP quarterly national accounts, UK - Office for National Statistics
← 2. ONS, Business investment in the UK: April to June 2025 revised results Business investment in the UK - Office for National Statistics
← 3. HM Treasury, Spring Budget 2023 – Full expensing Spring Budget 2023 – Full expensing - GOV.UK
← 4. At Spring Budget 2023, the Government announced full expensing from 1 April 2023 to 31 March 2026. At Autumn Statement 2023, the Government announced that full expensing would be made permanent.
← 5. Federation of Small Businesses, Small Business Index, Quarter 4, 2024 Small Business Index | Small Business Index, Quarter 4, 2024
← 6. British Chambers of Commerce, Quarterly Economic Survey, Q4 2024 Budget Tax Hike Bursts Business Confidence - British Chambers of Commerce
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← 8. Bank of England, Bankstats Bankstats tables | Bank of England
← 9. British Business Bank, Recovery Loan Scheme Recovery Loan Scheme | British Business Bank
← 10. The Recovery Loan Scheme launched in April 2021 but in July 2024 was extended and rebranded to the Growth Guarantee Scheme.
← 11. The BoE defines the real estate sector as real estate, professional services and support activities of which buying, selling and renting of own or leased real estate.
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← 14. Bank of England, Agents’ summary of business conditions – 2024 Q2 Agents' summary of business conditions - 2024 Q2 | Bank of England
← 15. The seven largest banks in the UK are HSBC Bank plc, Lloyds Banking Group plc, NatWest Group plc, Barclays Bank plc, Santander UK, Virgin Money UK and The Co-operative Bank.
← 16. UK Finance BVA BDRC, SME Finance Monitor, 3 month rolling analysis to end June 2025 SME Finance Monitor
← 17. The UK super-deduction allowance allowed companies to claim 130% tax relief on qualifying new plant and machinery investments made between 1 April 2021 and 31 March 2023. This temporary incentive reduced taxable profits by significantly more than the initial cost, effectively cutting tax bills by up to 25p for every £1 spent. Super-deduction - GOV.UK
← 18. British Business Bank, Small Business Equity Tracker 2025
← 19. British Business Bank, Power of 10: 10 Year Impact Report, January 2025 The Power of 10: 10 Year Impact Report | British Business Bank
← 20. OECD (2024), Financing SMEs and Entrepreneurs 2024: An OECD Scoreboard Financing SMEs and Entrepreneurs 2024 | OECD
← 21. British Business Bank, Recovery Loan Scheme (iteration 3) Performance Data as at 30 June 2024 Recovery Loan Scheme (iteration 3) Performance Data as at 30 June 2024 | British Business Bank
← 22. British Business Bank, Recovery Loan Scheme Recovery Loan Scheme | British Business Bank
← 23. British Business Bank, Growth Guarantee Scheme Growth Guarantee Scheme (GGS) | British Business Bank
← 26. OECD (2024), Financing SMEs and Entrepreneurs 2024: An OECD Scoreboard Financing SMEs and Entrepreneurs 2024 | OECD