Story Highlight
– West Midlands faces $5.66 billion SME funding gap.
– UK SME lending gap totals $65 billion nationwide.
– Business investment rate in UK is lowest in G7.
– SME loan rejection rates have increased to 40%.
– Allica Bank plans to lend $1 billion this year.
Full Story
Research conducted by Allica Bank reveals a significant funding deficit of $5.66 billion for small and medium-sized enterprises (SMEs) in the West Midlands. This figure is derived from an analysis comparing current SME lending patterns with historical lending benchmarks and relevant international markets. The findings underscore a broader issue, noting that the Big Six high-street banks have reduced their lending to SMEs over the past few decades, leading to a staggering national shortfall of $65 billion. Consequently, the UK now holds the lowest business investment rate among G7 nations.
With nearly 215,175 SMEs in the West Midlands, the absence of this $5.66 billion constitutes a critical lack of funds that could be harnessed for investment, growth, and productivity—an urgent requirement for a UK economy in need of revitalization. The report indicates that reduced SME lending has contributed to an overall national credit shortfall of about $65 billion.
Moreover, the study points out a discernible shift in the SME lending landscape; the proportion of SMEs seeking external funding has substantially declined from 65% in the late 1980s to just 25% during the 2022-2024 period. In tandem, loan refusal rates have surged, with rejection rates rising from between 5-10% three decades ago to 40% today.
The lack of financial support for SMEs is removing approximately $5.66 billion from the West Midlands economy, representing around 2.9% of the region’s GDP. In response, Allica Bank is advocating for enhanced support for local businesses and has set an ambitious goal to provide $1 billion in loans to established SMEs by the end of this year.
Eugene Vichare, Allica Bank’s Relationship Manager for the West Midlands, expressed concern regarding the challenges faced by local businesses in accessing necessary finance. “The West Midlands is home to some fantastic businesses and a business community that wants to invest, grow and innovate. All too often, however, business owners struggle to find the finance they need to do so,” he stated. Vichare highlighted that the focus of many banks has shifted towards lending to businesses with substantial assets or collateral, neglecting other sectors.
“Our data reveals that three decades ago only 5-10% of SME loans were rejected – a figure that stands at 40% today,” he added, emphasizing the disconnect between lending practices and the evolving business environment. He noted that this trend poses significant repercussions not only for the West Midlands but for the UK at large. “The Big Six banks have undervalued, underfunded, and leveled down the regional economy for too long; we’re aiming to remedy that.”
