New research from business bank Allica Bank has today revealed a gap of £8.1 billion in lending to South East SMEs (not including London) has emerged over the last thirty years.
The research highlights how the Big Six high-street banks have pulled back from SME lending in recent decades leading to a lending gap for the UK as a whole of £65 billion. It has left the UK with the lowest business investment rate in the G7.
For the 402,690 SME businesses in the South East not in London, that £8.1 billion is vital cash that could otherwise be directed toward investment, growth and productivity at a time when the UK is crying out for investment.
The £65 billion SME credit gap was worked out by comparing the current level of SME lending to historic lending trends and comparable global economies. The report calculated that, as a result of banks pulling back from SME lending, a gap of approximately £65 billion in the stock of SME credit has emerged.
The research also highlights how, in response to a tougher lending environment, the percentage of SMEs applying for external finance has fallen markedly from 65% in the late 1980s to just 25% between 2022-24. Likewise, SME loan rejections have risen from between 5-10% three decades ago to 40% today.
The lack of SME lending is sucking £8.1 billion of productive credit out of the South East’s economy – equivalent to around 0.01% of the region’s GDP.
Allica Bank is calling for greater support for regional businesses and is aiming to begin closing the lending gap with a target to lend £1 billion to established SMEs this year alone. The leading business bank – and one of the UK’s fastest growing companies and fintechs – is also boosting its relationship management team, tripling the number of relationship managers it has in the UK this year who can help local businesses find finance. In the South East region this includes Tom Easton, Wahid Nawaz, Sylvia Obadaki, Greg Roake, Taylor Hart and Tina Opie, along with Tim O’Donovan, Dermot Jordan, Rolly Bakshi, Ricky Kapoor, Ian Teeney and Adrian Eady in Greater London.
In a further boost to the region’s underfunded businesses, Allica is also aiming to turn around loan applications within just five days, recognising the importance of speed and certainty for business owners when they want to plan for the future. The fintech bank has invested heavily in its technology to enable it to provide answers to businesses quickly.
Commenting, Tom Easton, Allica Bank’s Relationship Manager for the South East said:
“The South East is home to some fantastic businesses and a business community that wants to invest, grow and innovate. All too often, however, business owners struggle to find the finance they need to do so.
“Recent decades have seen many banks focus lending only on businesses with significant assets and property, or shy away from supporting some sectors altogether. Our data reveals that three decades ago only 5-10% of SME loans were rejected – a figure that stands at 40% today. This shows a banking sector failing to keep pace with a changing economy and this is having real knock-on effects for the South East’s economy, and the country as a whole.
“A big contributor to this is the antiquated technology many big banks have, and the lack of real human support they offer established SME businesses in the South East. Relationship managers like myself can help business owners identify opportunities to borrow, can help them make a strong application and can champion that business within the bank. At Allica, we combine that relationship-based approach with smart technology that keeps things moving fast.
“As somebody who works with businesses across the South East every day and sees the creativity and dynamism waiting to be unleashed, I’m excited to be part of the team aiming to close that SME lending gap. The Big Six banks have undervalued, underfunded and levelled-down the regional economy for too long, we’re aiming to remedy that.”
