Leading the productivity charge

Research led by Allica’s CEO has been getting a lot of attention recently. The report, titled ‘Rebooting SME Finance to Unlock Growth’, revealed that a gap of around £90 billion in bank lending to SMEs has emerged over the past 25 years.

There are some clear links between this decline and the UK’s struggle to keep up with other countries on productivity. The research also highlights that the UK has the lowest business investment rate in the G7 and the lowest level of SME loan application rates recorded in the OECD.

Asset finance has been one of the few beacons of growth over the period, helping to plug up to £25 billion of the SME lending gap. Statistics from the Finance & Leasing Association (FLA) show that asset finance lending continues to increase steadily, with completions growing by 1% in February 2025, and the first two months of the year seeing a 2% increase compared to the same period in 2024.

That expansion still leaves a £65 billion SME credit black hole today, which is a distressing prospect as the UK so desperately looks for ways to boost productivity and kick the UK economy back into gear.

Allica Bank has been working with policy makers to call for measures to address the status quo, such as by bolstering the Growth Guarantee Scheme, which has been hugely valuable to many banks and businesses but needs to go further. We have also pushed for the government to work with the Bank of England to create a prudential framework that truly backs small businesses, and to back innovation in AI and relationship models to unlock more SME finance.

It’s not just down to government to take action, though. The asset finance sector has to step up further by aiming even higher and supporting even more businesses looking to grow.

Challenger banks take the lead

By looking at the most recent data from the British Business Bank (BBB), the trends suggest that the bulk of this lending is going to come from the challenger banks. In 2024, challenger banks accounted for 60% of lending to SMEs compared to the big five high-street banks.

It was the fourth year in a row that the figure increased, and I don’t expect this to stop. Challenger banks have shown that through a combination of innovative technology and human expertise they’re able to stay well ahead of the high-street competition and appetite to lend. This level of speed and service is critical in uncertain economic times such as these, with high-street models often unable to keep up or take a more nuanced view to lending applications.

At Allica, we are proud to be leading the way in supporting those businesses that want to invest and grow. We’ve invested heavily in our technology to support speedy decision-making, such as our auto-decisioning tool, providing brokers with greater transparency and freeing up our team to focus on adding value. We also reduced our rates earlier this year to help support a broader network of brokers and their clients.

As the UK explores how to generate growth, access to finance will be a critical component. It is incumbent upon lenders, policymakers, and the wider business community to support SMEs and reignite productivity in the UK. For Allica’s asset finance team, by focusing in on speed and service for our broker network, we’re committed to being at the vanguard of that change.

In a keynote interview at the AFC Summer Conference 2025, Richard Davies, CEO of Allica Bank, will offer his insights on how the UK’s challenger banks are tackling the £90 billion lending shortfall to SMEs. Drawing on Allica’s experience as a fast-growing, SME-focused bank, Davies will explore how technology, regulatory reform, and targeted capital allocation can reshape the lending landscape to better support UK small and medium-sized enterprises. With Allica having recently doubled its profits and surpassed £3bn in lending, Davies is well-placed to highlight both the opportunities and barriers for challenger banks in meeting the finance needs of a vital yet underserved segment of the UK economy. His session promises to be a pivotal moment in the conference’s broader asset finance discussion about boosting SME access to finance.

To find out more and book your place at the AFC UK Summer Conference on 3rd June at County Hall, London, visit the conference website.