Q2 SME lending climbs to post-pandemic peak but trails 2019 levels
Gross lending to SMEs reached a post-pandemic high of £5.35bn, extending a growth trend that had persisted for more than two years, according to UK Finance.
Its Business Finance Review for Q2 2026 showed lending was more than 25% higher than a year earlier and broadly flat on Q1, with annual growth among the main high street lenders accelerating to 26%.
UK Finance said this marked a 10th consecutive quarter of year-on-year expansion and the fastest growth rate since early 2024.
The trade body attributed the increase to strong loan approvals and resilient economic activity, but said the Middle East conflict and resulting energy price shock weighed on business and lender confidence.
Although lending to medium-sized firms remained resilient overall, activity slowed in May and June as oil prices and financial market volatility increased.
Q2 saw a decline in lending to small firms, compared to Q1. However, this was still higher year-on-year.
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Real estate was said to be a key driver of growth, with professional services also contributing positively.
Despite reaching a post-pandemic high, SME lending by the main banks remained below pre-pandemic levels. In real terms, lending in the first half of 2026 was still around a third lower than the 2019 average, according to the report.
David Raw, managing director of commercial finance at UK Finance, said: “The continued growth in SME financing since the pandemic is evidence of the sector’s resilience and testament to the collaboration between banks and businesses.
“Amid continued geopolitical tension, small businesses’ confidence inevitably took a bigger hit, and a more cautious business outlook across the sector reflects the uncertainty businesses face going forward and the impact this has on SME lending.”
