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Government's SME financing report

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In 2024, UK SMEs face worsening finance conditions with declining loan acceptance rates and growing pessimism, while proposed regulatory changes under Basel 3.1 could further restrict access to funding and increase borrowing costs.

In 2024, SMEs in the UK face increasingly difficult conditions for accessing finance, exacerbated by rising costs and higher interest rates. The reluctance of SMEs to seek external funding, stemming from distrust in lenders and fear of rejection, has persisted since 2018. Acceptance rates for SME loan applications have dropped significantly, from 80% in 2018 to around 50% in 2023, contributing to growing pessimism among SMEs. Additionally, the potential removal of the SME support factor under Basel 3.1 could further tighten credit conditions by increasing capital requirements for banks, leading to higher borrowing costs for SMEs. This may place the UK at a disadvantage compared to international peers, potentially harming the competitiveness of the UK market.

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