UK Finance’s latest Business Finance Review figures have shown that gross lending to small and medium-sized businesses across the UK totalled £63.6 billion last year, some 162% higher than 2019. This underscores a significant rise in demand for finance as businesses responded to the pandemic.
Government-backed lending schemes, alongside other loan and overdraft facilities, have helped SMEs to navigate the uncertainty of the pandemic and develop new products and business models. While some businesses have needed to use this money, some SMEs have put it aside for the future. At the end of 2020, nationwide deposits were 28 per cent higher than at the end of 2019, which suggests firms are leaving cash in reserve to support activity as the economy reopens.
Stephen Pegge, Managing Director of Commercial Finance, said “The enormous disruption faced by SMEs in the past year has been matched with a significant increase in the supply of finance, particularly through government-backed schemes. This lending has provided an important lifeline for businesses to manage cashflow and sustain activity through the successive lockdowns”.
“Some SMEs have entered 2021 with financial headroom in the form of increased deposits and flexibility in existing overdraft, invoice and asset-based lending facilities. However, for many businesses, and some specific sectors, there may be extended disruption and financial difficulty ahead. The banking and finance industry will continue to support businesses across the country through these times to help them trade and invest for recovery.”