The economic landscape of the North West has been significantly hampered by a staggering £6.33 billion funding gap impacting small and medium-sized enterprises (SMEs) over the past three decades. This substantial shortfall in SME finance, revealed by recent research from Allica Bank, underscores a critical issue in the region’s ability to foster business investment and innovation.
This persistent deficit is directly attributed to a long-term decline in bank lending by the UK’s six largest high-street banks. Nationally, this trend has contributed to an astounding £65 billion shortfall in SME credit, a figure inextricably linked to the UK’s unenviable position as having the lowest rate of business investment among G7 nations.
For the North West’s 265,000 SMEs, the absence of this £6.33 billion represents a vast sum that could have been channelled into crucial areas such as expansion, product development, and substantial productivity gains, thereby invigorating the North West Economy. This capital could have powered significant regional growth.
The £65 billion national figure was meticulously calculated by comparing current SME lending volumes against historical trends and robust international benchmarks. This comprehensive data compellingly suggests that contemporary lending practices have fallen drastically short of what would be anticipated based on past economic patterns and the experiences of comparable global economies.
Compounding the issue, the research also highlights a concerning decline in the number of SMEs actively seeking external finance, plummeting from 65% in the late 1980s to a mere 25% between 2022 and 2024. Simultaneously, the rate of loan rejections has escalated dramatically, surging from a modest 5-10% three decades ago to an alarming 40% today, further exacerbating the funding gap.
In response to this critical challenge, Allica Bank has publicly committed to addressing a portion of this shortfall, planning to extend £1 billion in SME finance to established businesses throughout 2025. This commitment is bolstered by an increased deployment of relationship managers, including key personnel like Pete Norris, Amanda Meyerhoff, and Asif Dogar, who are actively engaging with businesses across the North West Economy.
The bank emphasizes the paramount importance of rapid decision-making for businesses formulating future plans, aiming to process loan applications within a swift five-day window. To achieve this ambitious target and enhance the efficiency of bank lending, significant investment has been made in cutting-edge technology, streamlining the application and approval process.
Pete Norris, Allica Bank’s Relationship Manager for the North West, articulates the frustration experienced by local business owners. He notes that while the region boasts dynamic enterprises eager for business investment and growth, traditional banking models, often reliant on antiquated technology, have failed to adequately support them, contributing significantly to the funding gap. He stresses how a relationship-based approach combined with smart technology can unlock the creativity and dynamism essential for regional growth.
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