Specialist Banks Dominate Market with 55% Share: Is Traditional Banking at Risk?

posted in: Blog | 0


Specialist Banks Dominate Market with 55% Share: Is Traditional Banking at Risk?


Small businesses are the backbone of any economy, and supporting their growth and success is critical to ensuring the overall health and prosperity of a nation. That is why the findings of the British Business Bank’s Small Business Finance Markets 2022/23 report are so important, as they shed light on the current state of lending and finance for small businesses in the UK. 

The report reveals that while gross bank lending to smaller businesses increased by an impressive 12.8% in 2022 to £65.1 billion, net lending actually fell by £8.5 billion. This is largely due to the repayments made on COVID loans, which have helped many businesses weather the storm of the pandemic but have also had an effect on their ability to access additional financing. 

However, there is still reason for optimism. Specialist banks and challenger banks had a very successful year, with lending to smaller businesses hitting a record high of £35.5 billion. This exceeds lending by major banks and shows that smaller businesses are increasingly turning to alternative sources of financing to support their growth and operations. 

The report also highlights some challenges in the smaller business equity finance market. While demand for investment in green innovation has surged, smaller deal sizes and lower valuations have led to a slowdown in the market. This is a worrying trend, as innovative businesses are more likely to use external finance to fuel their growth but may struggle to access the funding they need due to cost and availability barriers. 

To address these challenges and support the growth of small businesses, policymakers and lenders need to take a proactive approach. This includes making financing more accessible and affordable for small businesses, especially those in under-served communities. It also means investing in initiatives that support innovation and sustainability, such as the development of green finance products and the creation of funding programmes specifically designed for innovative businesses. 

Ultimately, the success of small businesses is vital to the health and prosperity of the UK economy. Working together to address the challenges they face and support their growth and success can create a more vibrant, dynamic, and sustainable business landscape for all.