The UK’s small and medium-sized enterprises (SMEs) are experiencing a boost in financial support, while the financial services industry is addressing critical regulatory changes.
Recent updates from UK Finance highlight these developments: a notable increase in SME lending and the release of a position paper on the national transposition of Article 21c of the Capital Requirements Directive VI (CRD VI).
These updates reflect the evolving landscape of business finance and regulatory frameworks in the UK and EU
UK Finance’s latest Business Finance Review reveals an 8 per cent increase in gross lending to SMEs by major high street banks in the second quarter of 2025, reaching £4.24 billion compared to the same period in 2024.
This growth signals a strong commitment from the banking sector to support small businesses, which form the backbone of the UK economy.
SMEs, ranging from startups to established firms, rely heavily on such funding to fuel growth, manage cash flow, and navigate economic uncertainties.
The rise in lending reflects several factors.
First, banks are increasingly tailoring financial products to meet SME needs, offering flexible loans, overdrafts, and asset finance.
Second, improved economic conditions and confidence in the SME sector may be driving demand for credit.
This growth aligns with broader efforts to bolster economic recovery post-pandemic, with SMEs playing a pivotal role in job creation and innovation.
However, challenges such as rising interest rates and inflationary pressures could impact repayment capacities, necessitating careful risk management by lenders.
The £4.24 billion figure underscores the banking sector’s responsiveness to SME needs, but it also raises questions about sustainability.
While the increase is positive, ensuring that lending is accessible to diverse SMEs—particularly those in underserved regions or sectors—remains critical.
UK Finance’s report suggests that banks are leveraging data and digital tools to streamline lending processes, which could further enhance access to finance.
For SMEs, this trend offers opportunities to invest in growth, but they must navigate a complex economic environment to make the most of available funds.
In addition to these updates, UK Finance, alongside other financial services industry bodies, has published a Position Paper on the National Transposition of Article 21c CRD VI.
This paper aims to guide EU Member States in implementing Article 21c, a key component of the EU’s updated Capital Requirements Directive.
Article 21c focuses on enhancing the resilience of financial institutions by addressing third-country branch supervision, ensuring that non-EU banks operating in the EU meet regulatory standards.
The position paper emphasizes the need for consistent and proportionate implementation across Member States to avoid regulatory fragmentation.
Such fragmentation could increase compliance costs for banks and create uneven playing fields, potentially undermining the EU’s financial stability objectives.
The paper advocates for clear guidelines on capital requirements, governance, and risk management for third-country branches, balancing oversight with operational flexibility.
For the UK, which is no longer part of the EU, the implications of Article 21c are significant.
UK-based financial institutions with operations in the EU must navigate these new rules to maintain market access.
The position paper serves as a collaborative effort to shape national transposition processes, ensuring they are practical and aligned with global financial standards.
By providing detailed recommendations, UK Finance and its partners aim to support regulators in crafting policies that foster stability without stifling innovation or competitiveness.
Together, these updates highlight the dual focus of the financial sector: supporting economic growth through SME lending and adapting to evolving regulatory frameworks.
The increase in SME lending reflects optimism about the UK’s economic trajectory, but sustained growth will depend on addressing structural challenges like access to finance for smaller or newer businesses.
Meanwhile, the CRD VI position paper underscores the importance of harmonized regulation in maintaining a resilient and competitive financial sector.
As the UK and EU navigate these changes, collaboration between industry, regulators, and policymakers will be crucial.
For SMEs, access to finance remains a lifeline, while for financial institutions, regulatory clarity is essential for long-term stability.
UK Finance’s efforts in both areas appear to demonstrate its pivotal role in shaping a dynamic and resilient financial services sector.