There has been a 20% drop in lending to SMEs over the last year. This is according to a review by UK Finance. Gross lending to SMEs was £3.5bn in the third quarter of 2023. This compares with £4.4bn in the same period last year. The report attributes the decline to “demand uncertainty, higher interest rates and the impact of lending taken out during the pandemic i.e. Bounce back Loans etc.” It also says that traditional lenders are becoming more cautious about lending to small firms. It speculates that this is leading to a reliance more on existing resources such as savings/cash deposits, instead of new funding. This is evidenced by total deposits falling 4.5%. Overdraft approval numbers have also dropped, possibly due to an easing in cost pressures. The higher interest rates environment will also be suppressing firms’ appetite to borrow.”