Bank lending to British businesses has sunk to its lowest level in nearly 30 years. By Q3 2025, loans to non-financial companies hit 59 per cent of UK GDP, a figure last seen in 1998, BCG research shows. At its 2008 peak, that ratio stood at roughly 90 per cent. Weak growth and tighter regulation have made banks pull back from riskier SME lending.

SME loans have borne the brunt of this retreat, dropping from 12 per cent of GDP in 2011 to 6.5 per cent by 2026. Real estate SMEs now claim 51 per cent of small business loans versus 39 per cent a decade ago. BCG's Raoul Ruparel said the sector has shifted from supporting productivity growth to dragging on it, calling that a structural problem.

Private credit has not filled the gap — total credit sits 17 per cent below historical trend. Banks blame weak demand, though a senior UK banker noted the real issue is shrinking investment. HSBC's Michael Roberts revealed the bank's capital requirements for SME lending are five times higher than for private credit groups financing the same firms.