Demand for commercial finance has plateaued as international conflict and interest rate expectations dampen business confidence, according to Atom bank’s latest SME Pulse survey.

The bank's Q1 2026 report found more than half of commercial brokers (54%) saw no change in demand for external funding over the previous three months, the highest level of unchanged demand since the survey launched in 2023. Only a third reported rising demand, down from 61% in the previous edition.

Higher interest rates and broader economic uncertainty were cited by 86% of brokers as the main reasons for weaker appetite for borrowing. Among those seeing increased demand, greater product choice and stronger lender appetite were identified as key drivers.

Geopolitical uncertainty is also influencing sentiment. Almost half of brokers (49%) said clients were concerned about the impact of conflict in the Middle East, while 51% said such events had made advising on external finance more difficult. Separately, 65% said changing expectations around interest rates had directly reduced demand for funding.

Access to finance showed signs of becoming more difficult again, with the proportion of brokers reporting issues rising to 19% from 11%, although respondents noted a broader range of lenders remains active in the market.

Tom Renwick, head of business lending at Atom bank, said: “It is encouraging that demand remains resilient, but the plateau shows how global events and changing rate expectations influence borrowing decisions. Greater stability would give businesses the confidence to move ahead with growth plans.”

The survey did find strong demand for smaller loans. Nearly half of brokers (47%) receive enquiries for borrowing between £100,000 and £250,000 at least weekly, while 19% receive them daily. However, 83% believe more lenders are needed in the small loans market to improve competition and access.

“It’s also revealing to see just how significant demand is for small loans currently. As an industry, we need to ensure these businesses are properly catered for, and have access to the loans which can have a transformative impact on their future prospects, even if the sums involved are more modest,” Renwick said.

---