SME lenders warn of ‘growth challenge’ from UK Budget
The UK Budget may present “challenges” for lenders to mid-sized businesses, but industry figures insist it should not prevent enterprises from growing, acquiring or investing.
Chancellor Rachel Reeves unveiled a series of measures which could impact small and medium-sized enterprises (SMEs) , including permanently lowering business rates for some firms and an increase to the minimum wage.
In response, Mike Hackett, chief commercial officer at ThinCats, said the key issue for SME lenders is whether the Budget will increase growth. However, with the Office for Budget Responsibility (OBR) now expecting UK growth to slow more than previously forecast from next year, the outlook remains uncertain.
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“As a lender to mid-sized businesses, the key question is whether this Budget will support growth and encourage borrowing,” Hackett said. “Judging by the policies announced, it will be a challenge for many, more so for smaller businesses already facing higher taxes and rising employee costs.”
He stressed that the measures should not stop businesses from expanding. “This is not going to stop businesses from growing, acquiring and investing, especially mid-sized businesses who will be planning years in advance, but for certain sectors and for companies at different points of the cycle, it will delay plans and reduce borrower appetite.”
The OBR now expects growth of 1.4 per cent in 2026, down from a forecast of 1.9 per cent in March. Following the Budget, it said growth is set to “pick up only gradually” in the near term amid global conflict, trade disruption and continued uncertainty. It added that business and consumer confidence in the UK remains “subdued, including in anticipation of further tax rises”.
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Lisa Jacobs, chief executive at SME lender Funding Circle, struck a more positive tone, arguing that the Budget offers businesses much-needed clarity.
“While the announcements paint a mixed picture for SMEs, the government’s commitment to a single yearly Budget and the doubling of fiscal headroom will help provide longer-term stability, giving firms the confidence to grow and invest,” she said. “We’re optimistic about the future and want to see a shift from stability to growth as we continue providing SMEs with the finance to fuel their businesses.”
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