The timing of data availability to Credit Bureaux means it is too early for Experian to have a firm view of SME lending volume and value after the Budget. There are, however, some early indicators. Firstly, the UK Purchasing Managers’ Index (PMI) points to a robust start to 2026, with the Composite PMI at its highest level since April 2024. Similarly, the latest ONS Business Insights & Conditions Survey shows a slight improvement in business concerns, though lack of demand remains the prevailing factor.
However, construction PMI remains negative, pointing to contraction in this sector rather than growth, and changes announced in the UK Budget suggest continued pressure on SME margins—especially for those with a higher concentration of lower paid employees. At present, signals suggest that employment intentions remain weak in consumer facing sectors, and unemployment levels may stay elevated through 2026. The few Christmas trading updates released at the time of writing present a mixed picture, with the narrative focusing on consumers being cautious and cost conscious over the Christmas period.
Set against this, the actual credit picture shows a market continuing to evolve in its mix of borrowing rather than shrinking. By December 2025, businesses continued to pull back from overdrafts, and the proportion of current accounts overdrawn continues to drop. In contrast, levels of revolving credit have expanded sharply, suggesting greater reliance on flexible, often higher cost credit lines.
On credit performance, the narrative is similarly balanced: risk quality is stable, but stress is evident at the margins. Delinquency rates have eased compared with the peaks seen in early 2025, but have ticked up in recent months. Default rates -alongside company insolvencies – remain at high levels. While fewer accounts may be rolling into early delinquency, a subset of already stressed firms is still failing, consistent with some of the sectoral strain seen in the market.
Overall, UK SME lending ended 2025 in a position best described as resilient but uneasy: the economy offers some green shoots and the Budget has brought stability back into the market, but cost pressures and uneven demand are reshaping borrowing behaviour, while insolvencies and defaults continue to trend higher. In this environment, portfolio monitoring and sector targeting may matter as much as headline growth.