Business Finance & Lending Statistics 2023

The last few years have seen some unprecedented challenges for businesses, both within the UK and globally. First, there was Brexit, which added cost and complexity for businesses that operate internationally, and/or previously hired staff from overseas.

Next came the COVID pandemic and the various financial challenges that were introduced, ranging from the need to purchase extra equipment to enable remote working, PPE costs so that in-person work could continue, and increased transport costs as demand for shipping containers, etc. increased significantly.

Add to that, significant increases in energy costs, led, in part, by the start of the war in Ukraine. Rising energy costs have impacted businesses, consumers and staff alike. This has contributed to a cost of living crisis, which, in turn, has led to a double-whammy for businesses; the need to increase salaries to support staff, whilst at the same time, seeing reduced income in certain sectors.

And if that wasn’t enough, the Bank of England has raised interest rates several times in an attempt to stem rising inflation.

Suffice to say, each challenge has added its own layer of financial and logistical pressures to businesses, with each additional level compounding matters further. But what impact is this having on lending for UK businesses? Are businesses seeking additional funding in order to survive, or in an attempt to grow their way through the challenges? Or are businesses now failing due to the inability to secure funding?

In this article, we’ll look at some of the key data which is currently available in order to provide some helpful insights as to the current economic climate in regard to business funding.

Key Statistics Leading to Current Business Challenges:

Before we look at the current lending stats, let’s look at some of the data which has led to the current financial climate for businesses which has influenced either the need for funding or the ability to secure funding.

• As of March 2022, it was estimated that COVID-19 cost small businesses in excess of £109bn with 1-in-6 small business owners saying they didn’t think they would recover to pre-pandemic trading levels
• September 2022 - UK Media claims the UK’s “mini-budget” was estimated to have cost the UK £30bn
  *Note: The £30bn figure actually relates to the cost of the mini budget to the UK Treasury. However, some UK media publications cited this as being the estimated cost to the UK economy which is incorrect and cited figures as high as £60bn to £78bn. However, it’s fair to say that regardless of the final cost, at the time it caused significant unrest within the market, which in turn, triggered several problems which business is still feeling the ripple effects of in 2023
• Despite the above, in the same study, 43% of small business owners remained confident about the future of their business, due in part to a need to learn new skills (30%), adapt their business to offer new services or products (22%) or use new technologies (18%)
• Bank-to-business lending during the pandemic soared with lenders providing over £27.5bn to over 650,000 businesses via the Coronavirus Business Interruption Loan Scheme (CBILS), Coronavirus Large Business Interruption Loan Scheme (CLBILS), Bounce Back Loan Scheme (BBLS) and Future Fund Scheme
• The Energy Bill Relief Scheme (EBRS) which provided support for businesses in relation to rising energy costs, is estimated to have cost the Treasury £6.7bn. However, support is now being withdrawn which means businesses will need to find new ways to fund increased energy costs until the price drops which is expected to happen in 2024
• Corporation tax will rise from 19% to 25% in April 2023 for companies with profits over £250,000
• A Lloyds Banking Group Survey (of 1,472 SMEs) revealed that 82% of business owners said the rising cost of living was having a negative impact on them
• UK Bank of England Base Rate was at an all-time low of 0.1% pre-pandemic. It subsequently has risen sharply to (at the time of writing) 4.25% with the next review due on the 11th May 2023

[Source: Bank of England]

Business Lending Statistics for 2023

• According to EY Item Club, Bank to Business lending is expected to decrease by 3.8% in 2023 (equating to approximately £18.8bn) due to reduced applications caused by increased economic uncertainty, higher costs, decreased revenues and continued supply chain issues
• However, forecasts estimate that 2024 may see a return to growth; albeit slight, at just 0.9%
• EY Item Club are forecasting write-off rates of business loans to peak at around 0.8% in 2023 due to higher borrowing costs. However, it is anticipated this will begin to drop to 0.6% in 2024 and 0.5% in 2025.
• Currently, more than 70% of corporate bank loans are at variable rates. This uncertainty of interest rate increases reluctance to make investments for growth and makes small to medium-sized businesses more vulnerable to rate rises.
• Innovation funding can help businesses grow faster. A study showed that companies who received research and development grants (R&D) grew turnover 7.6% faster in the first 3 years following funding, and 23% faster six years after compared to firms who did not receive funding
• Challenger banks and specialist banks lent around £35.5bn in 2022, exceeding lending by traditional banks
• According to a study by the British Business Bank, 66% of SME innovators utilised business finance compared to 58% of all businesses
• Asset finance markets saw an increase in new business by 11% to £22.5bn
• Success rates for business loan applications fell sharply in 2022 from 80% year-on-year to just 60%
• IBISWorld is estimating business lending to PNFCs to reach £496bn in 2023 which represents a rise of 4%

[Source: IBISWorld]

[Source: IBISWorld]

• The effective interest rate on new SME business loans was 5.92% as of January 2023

Start-Up Loan Scheme Statistics for 2023:

Whilst Union Business Finance doesn’t offer the Start Up Loan scheme ourselves, we know it may be a suitable option for some of our small business clients. Therefore, no statistics article would be complete without some data regarding this important funding solution for small businesses:

• As of February 2023, the UK Government’s Start Up Loans scheme has granted over 100,000 business loans worth more than £941 million
• Despite the cost of £941 million, the UK Government says that the Start Up Loan scheme has benefited the whole of the UK, resulting in an estimated £5.3bn total economic activity
• The average loan amount for Start Up Loan applications was £9,389
• 40% of the granted Start Up Loans were to female entrepreneurs, and 20% of granted loans were to entrepreneurs from Black, Asian or other ethnic minority backgrounds
• 21% of companies granted funding via the Start Up Loan scheme were based in London, 12% were in the North East and 10% were in the South East

Consumer Statistics for 2023

For B2C businesses, it’s important to know what is happening in terms of consumer lending and consumer confidence when planning for the next 12-18 months, so this section provides some insight into that.

• Growth of unsecured loans is forecast to rise from 4.4% net growth in 2022, to 4.8% net in 2023 which equates to growth of 9.9bn. This demonstrates consumer credit is being to rebound to pre-pandemic levels, and the rate of growth is slightly faster than in 2022
• Consumer credit write-off rates are estimated to be 2.7% which is the highest since 2011, and up from 1.7% in 2022. This may influence the sales of larger value purchases such as cars.

Current data indicates that consumer confidence in 2023 is set to improve cautiously as energy prices begin to decrease, but it’s likely to be in 2024 when we see stronger gains in consumer confidence.

Grow Your Business Faster Today

As shown above, companies who secure funding to grow their business faster and those who have access to funding are more likely to survive more challenging times.

Contact us to learn more about how we can help your business today.