I attended the UK Finance: Commercial Finance Conference earlier this week and wanted to share a few reflections. According to the Federation of Small Businesses (FSB), SMEs make up 99.9% of all UK businesses and account for around 61% of private sector employment. They are, by every measure, the backbone of the UK economy.
Since the pandemic, this segment has faced persistent pressure: trade tensions, political uncertainty, supply chain fragility, economic fragmentation, rising input costs, and tighter margins.
Ben Chu’s keynote, Exile Economics, framed the macro direction clearly. The era of unfathomably interconnected economies is being unwound — replaced by a move toward national self-sufficiency and economic isolationism. For the UK, a trade-driven and globally exposed market, this is a structural headwind.
And it makes the case for a stronger, better-capitalised SME base even more critical.
1. Rethinking the role of debt
Debt remains misunderstood. Too often, it’s treated as a short-term fix rather than a strategic enabler. That mindset needs to change. If we want businesses to scale, they need capital that supports growth — not just working capital.
The way we categorise SMEs doesn’t help either. A sole trader and a scale-up do not have the same capital needs. Treating them as a single segment leads to poor targeting, blunt instruments, and limited impact.
2. Lending models need to reflect the economy we actually have
The UK is a services-led economy. Most SMEs are asset-light. Traditional collateral-backed lending is increasingly misaligned with the nature of the businesses we’re trying to support.
More access to flexible, cashflow- and performance-based approaches are needed — especially for high-growth firms without physical assets. This is where blended finance models have a role to play.
3. Private markets are accelerating — and shifting the dynamic
While traditional bank lending remains vital to the SME ecosystem, private markets are expanding at a much faster pace — projected to reach $14.8tn globally by 2028, compared to £487bn in UK bank lending (UK Finance, UK Public and Private Capital Markets – A Unified Strategy for Growth and Prosperity, March 2025).
Banks, constrained by regulation and capital requirements, often struggle to remain agile and commercially relevant across the full spectrum of SME need. But that doesn’t mean they’re out of the picture.
We’re now seeing encouraging partnerships forming between banks and private market firms — combining balance sheet strength with specialist capital and faster execution. This kind of hybrid model may well define the next chapter of SME funding.
4. Infrastructure will dictate pace
Markets like the Nordics and Singapore are setting the benchmark for digital financial infrastructure.
The Nordics have long leveraged national digital ID systems and open banking frameworks to streamline SME onboarding and improve credit access. Singapore, meanwhile, is investing heavily in tokenisation, open finance, and government-backed digital platforms designed specifically to enable SME growth.
These aren’t speculative innovations — they’re operating models. And they’re moving capital faster, with less friction, and greater precision.
If the UK wants to compete on productivity and scale, this is where investment needs to shift.
The challenge is no longer intent — it’s execution.
SMEs don’t need generic products. They need more personalised services supported by solutions tailored to where they are and where they’re going. That means funding the right businesses, with the right capital, at the right time — and moving at their speed.
Get that right, and we won’t just unlock growth — we’ll reshape the UK’s competitive edge in the decade ahead.
