Story Highlight
– West Midlands faces $5.66 billion SME funding gap.
– UK overall SME lending shortfall is $65 billion.
– SME loan rejection rates have increased to 40%.
– Allica Bank aims to lend $1 billion this year.
– Current lending practices hinder regional business growth.
Full Story
New findings from Allica Bank reveal a significant funding shortfall of $5.66 billion for small and medium-sized enterprises (SMEs) in the West Midlands. This figure emerges from an analysis that juxtaposes current SME lending levels with historical performances and lending trends from similar economies worldwide. The report underscores a broader issue across the UK, where a $65 billion lending gap persists due to a decrease in financing from the major high-street banks, impacting the country’s status as the G7 nation with the lowest rate of business investment.
For the West Midlands, which is home to approximately 215,175 SMEs, this $5.66 billion represents crucial funding that could be used for investment, enhancing business growth, and boosting productivity—essential needs as the UK economy seeks revitalization. The report indicates that the decreasing willingness of banks to finance SMEs has led to a national shortfall of about $65 billion in SME credit availability.
Moreover, the study points out a notable decline in SMEs seeking external finance, dropping from 65% in the late 1980s to just 25% between 2022 and 2024. Concurrently, the rejection rates for SME loan applications have surged from around 5-10% three decades ago to approximately 40% at present. This decline in lending availability has stripped away $5.66 billion of potential productive credit from the West Midlands market, approximately equating to 2.9% of the region’s gross domestic product (GDP).
In light of these findings, Allica Bank is advocating for heightened support for regional businesses, announcing an ambition to provide $1 billion in loans to established SMEs within the current year. Eugene Vichare, Allica Bank’s Relationship Manager for the West Midlands, stated, “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.”
Vichare further highlighted the challenges posed by banks’ lending practices over recent decades, which have often favored businesses with substantial assets while neglecting certain sectors entirely. “Our data reveals that three decades ago only 5-10% of SME loans were rejected – a figure that stands at 40% today. This shows a banking sector failing to keep pace with a changing economy and this is having real knock-on effects for the West Midlands economy, and the country as a whole,” he remarked.
Allica Bank aims to address these disparities, asserting that the Big Six banks have historically undervalued and underfunded the local economy.
