Helping SMEs build on their resilience
Luke Watson, Director of Intermediary Sales & Lending, Recognise Bank
UK SMEs have had plenty thrown at them over the past few years. Inflation, higher borrowing and employment costs, volatile energy prices, and geopolitical uncertainty have all created challenges. But what continues to impress me is the resilience of businesses and their willingness to keep investing when the right opportunities arise.
The latest figures from UK Finance support the idea that many SMEs are continuing to invest, borrow and pursue growth. The trade body’ s latest Business Finance Review shows gross lending to SMEs reached £ 5.35bn in the second quarter of 2026, higher than the same period last year and a new post-pandemic high. In fact, year-on-year gross lending has now increased for ten consecutive quarters.
Perhaps one of the most striking findings is what has happened among medium-sized businesses. The data outlines that gross lending to medium-sized firms appears to have defied the turmoil surrounding the US- Iran conflict, with year-on-year growth gaining further momentum.
That is significant when you consider the volatility businesses were facing during the quarter, from higher energy costs to movements in financial markets.
It also tells us something important about the SME market, as challenging conditions do not necessarily remove the appetite to grow.
Resilience does not mean an absence of pressure
Despite these headline figures, we shouldn’ t interpret them as suggesting that every business or sector is experiencing the same conditions.
UK Finance points to a more mixed picture beneath the overall numbers with lending weakening in areas such as manufacturing and hospitality, while real estate and professional services were important contributors to growth. Lending to medium-sized businesses also softened during May and June as oil prices and market volatility peaked.
There are also clear indications that businesses are managing working capital more actively. Overdraft utilisation reached 51.4 % in June, its highest level since March 2020, while businesses in some sectors have been drawing more heavily on cash deposits. Loan applications also fell during the quarter as geopolitical tensions escalated.
These figures reinforce the point that resilience should not be confused with businesses simply carrying on as normal. SMEs are adapting and carefully reviewing costs, protecting cashflow, restructuring borrowing and deciding where to invest whilst at the same time, many are still prepared to act when the right opportunity arises.
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