SME lending rises by 16% hitting post-pandemic high

Lending to small and medium-sized enterprises (SMEs) rose 16 per cent year-on-year to £5.3 billion in the first quarter of 2026, according to UK Finance’s Business Finance Review.

This was the highest level of SME lending since 2021 and demonstrates both strong demand for SME finance and the continued role of high street bank lenders in delivering this support.  

The data also shows a 51 per cent increase in lending to the smallest businesses year-on-year, bringing gross lending to its highest level since the first quarter of 2018 (excluding Covid lending schemes).  

There was a significant year-on-year increase in new loan approvals, with jumps of 36 per cent in loan value and 42 per cent in loan volume.  

There was also strong lending growth across a broad range of sectors – including real estate (up over one third), agriculture (up by nearly a quarter) and recreation and personal services (up two thirds).  

There were, however, some early signs of the impact of ongoing geopolitical events, with loan applications falling in March after a strong start to the year, and overdraft applications rising. With costs rising and ongoing global uncertainty, policies to support SME lending and growth will be critical. 

To help even more SMEs access the finance they need, UK Finance is calling for the government to deliver an expanded Growth Guarantee Scheme (GSS), as we know that demand already exceeds its capacity. We estimate there is the potential to support around £4 billion in additional SME lending each year, driving over £10 billion in SME turnover and giving even more SMEs the support they need to grow, hire, and invest. 

David Raw, Managing Director for Commercial Finance at UK Finance said “Today’s figures show lenders are supporting SMEs, and it’s particularly encouraging to see the jump in lending to the smallest businesses. The economic outlook remains uncertain, but there are steps we can take to help even more SMEs to thrive, such as expanding the government’s Growth Guarantee Scheme. We believe an expanded scheme could unlock billions in additional lending to help deliver investment, growth and jobs across the UK. “