Research and analysis

Bank lending to UK Small and Medium Sized Enterprises 2001 to 2012: evaluating changes

Analyses the changing market for bank lending to SMEs before and after the financial crisis of 2008.


Evaluating changes in bank lending to UK SMEs over 2001-12: ongoing tight credit? Chart data

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Analyses of changes in the market for bank lending to small and medium enterprises (SMEs). This independent research was prepared by the National Institute of Economic and Social Research (NIESR). It is based on an analysis of a series of surveys of SMEs between 2001 and 2012, including the UK Survey of SME Finances and the SME Finance Monitor. It uses an econometric model to control for certain business characteristics, eg risk rating, size, whilst observing changes in rejection rates, margins, arrangement fees, and collateral requirements.

The findings indicate:

  • bank finance became more difficult for SMEs to obtain following the 2008 to 2009 financial crisis, and has remained relatively difficult to obtain since, compared to the period before 2008
  • rejection rates for loans and overdrafts increased following 2008 to 2009
  • SMEs with a low or average credit risk were more likely to be rejected for loans after 2008, than similar SMEs were before 2008; the rejection rate for firms rated as high risk did not significantly change
  • margins on loans and overdrafts (relative to the (Bank of England base rate)[]) rose in 2008 to 2009 and have remained relatively high in the past three years
  • arrangement fees or the likelihood of being required to provide collateral have not significantly increased
  • economic uncertainty appears to affect bank lending to SMEs disproportionately compared to large firms
  • higher capital adequacy amongst banks appears to affect bank lending to SMEs disproportionately compared to large firms

We first published the report on 12 April 2013. The authors, NIESR, have reworded some sections following feedback comments from a research discussion event at the Department for Business, Innovation and Skills (BIS). They have also made some changes in the data on the econometric analysis. The conclusions remain the same.

Published 12 April 2013
Last updated 7 May 2013 + show all updates
  1. Updated report published following feedback from a research discussion event.
  2. First published.