Business bank calls for action as research reveals Wales’ £2.9 billion lending gap

New research from a business bank has revealed a gap of £2.92 billion in lending to Wales’ SMEs has emerged over the last thirty years.

The research commissioned by Allica Bank highlights how the Big Six high-street banks have pulled back from SME lending in recent decades leading to a lending gap for the UK as a whole of £65 billion. It has left the UK with the lowest business investment rate in the G7.

For Wales’ 104,895 SME businesses, that £2.92 billion is vital cash that could otherwise be directed toward investment, growth and productivity at a time when the UK is crying out for investment.

Lending trends

The credit gap was worked out by comparing the current level of SME lending to historic lending trends and comparable global economies. The report calculated that, as a result of banks pulling back from SME lending, a gap of approximately £65 billion in the stock of SME credit has emerged.

The research also highlights how, in response to a tougher lending environment, the percentage of SMEs applying for external finance has fallen markedly from 65% in the late 1980s to just 25% between 2022-24. Likewise, SME loan rejections have risen from between 5-10% three decades ago to 40% today.

The lack of SME lending is sucking £2.92 billion of productive credit out of Wales’ economy – equivalent to around 3.2% of the region’s GDP.

Allica Bank is calling for greater support for regional businesses and is aiming to begin closing the lending gap with a target to lend £1 billion to established SMEs this year alone. The leading business bank – and one of the UK’s fastest growing companies and fintechs – is also boosting its relationship management team, tripling the number of relationship managers it has in the UK this year who can help local businesses find finance.

Allica has invested heavily in its technology to enable it to provide answers to businesses quickly, recognising the importance of speed and certainty for business owners when they want to plan for the future.

‘Business community’

Commenting, Tom Hine, Allica Bank’s Relationship Manager for Wales said: “Wales is home to some fantastic businesses and a business community that wants to invest, grow and innovate. All too often, however, business owners struggle to find the finance they need to do so.

“Recent decades have seen many banks focus lending only on businesses with significant assets and property, or shy away from supporting some sectors altogether. Our data reveals that three decades ago only 5-10% of SME loans were rejected – a figure that stands at 40% today. This shows a banking sector failing to keep pace with a changing economy and this is having real knock-on effects for Wales’ economy, and the country as a whole.

“A big contributor to this is the antiquated technology many big banks have, and the lack of real human support they offer established SME businesses in Wales. Relationship managers like myself can help business owners identify opportunities to borrow, can help them make a strong application and can champion that business within the bank. At Allica, we combine that relationship-based approach with smart technology that keeps things moving fast.

“As somebody who works with businesses across Wales everyday and sees the creativity and dynamism waiting to be unleashed, I’m excited to be part of the team aiming to close that SME lending gap. The Big Six banks have undervalued, underfunded and levelled-down the regional economy for too long, we’re aiming to remedy that.”

Methodology

The £65 billion SME lending gap is based on long-term trends showing how much small business lending in the UK has fallen behind where it would be if historic patterns had continued.

This figure was identified in research by Allica Bank in its ‘Rebooting SME Finance to Unlock Growth’ report, published in April 2025. It was calculated using Bank of England data and cross-checked against previous studies from organisations such as the British Business Bank and UK Finance.

To estimate how this national shortfall affects different parts of the country, we’ve used data from UK Finance, which shows the total value of SME lending currently outstanding in each region, broken down by postcode.

Allica then applied the assumption that each region’s share of the total national lending would also reflect its share of the total £65 billion gap.

Sources used: ‘SME Lending within UK postcodes (H2 2024)’, UK Finance, July 2025, ‘Regional gross domestic product‘, ONS, April 2025