Business lending by high street banks increased in Q1 to £4.6bn, a sixth consecutive quarterly rise and the highest amount since Q2 2022, new UK Finance figures have revealed.

The latest figure represents a 14% annual increase, with UK Finance suggesting the rise has been driven by the agriculture, manufacturing, retail and health sectors.

Lending by high street banks to smaller businesses with an annual turnover of less than £2m was particularly strong, the banking trade body stated, up 30% year-on-year, while lending to medium-sized businesses registered a 9% increase.

UK Finance’s latest data also revealed a year-on-year increase in loan overdraft approvals. Compared with Q1 2024, the totals of new loans and overdrafts approved were 37% and 8% higher, respectively.

Managing director of commercial finance at UK Finance, David Raw, said that SMEs are a “vital part of the UK economy”.

“It is encouraging that lending to them continues to go up,” Raw added. “It is particularly welcome to see small businesses specifically accessing greater levels of finance than this time last year.

“The regulatory environment is important and that is why we think the Government should make the Growth Guarantee Scheme permanent and increase the size of the scheme’s budget. This would help support even more SME lending.

“Banks have finance available for SMEs, enabling them to invest and grow. The industry will continue to work with businesses, Government and regulators to support both the supply and demand of finance, driving economic growth.”

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