Small and medium sized businesses in aggregate enter 2019 with credit balances at record levels and borrowing essentially flat over the last couple of years with, according to UK Finance members? data, deposits now standing at double outstanding debts. Many business surveys point to weakening of confidence and this has clearly affected their willingness to commit to investments but, on the other hand, liquidity is strong for most businesses, so their ability to weather economic storms is better than in previous periods of uncertainty.

More encouragingly, the independent SME Finance Monitor funded by major business banks shows that, towards the end of the year, ambition has reached record level with more than half declaring their wish to grow their businesses. It is even higher for those engaged in international markets despite the fact that concerns about the economic climate and political uncertainty have also peaked. Those international businesses are also more likely to be seeking finance, yet given their reservations about the outlook, many are still looking for opportunities to grow without extending their indebtedness. Some do worry that fear of being turned down when applying for finance may be holding back firms. There is little evidence that this is a significant factor. Only one per cent of SMEs according to the Monitor's large scale survey declare themselves ?would-be seekers? of finance who actually have a need for finance and, even then, it is more likely to be other factors than discouragement from a bank that puts them off. But with approval rates at around 85 per cent, the right to appeal and get an independent review, including referral to alternative sources of finance (of which there are now a very wide range of competitive options), there should be no reason that any viable business should lack the finance they need to trade and invest.

Of course, the SME sector is diverse and trends vary by sector. Borrowing in the property sector and in agriculture has grown while construction has gone into reverse on a net basis. This doesn't mean to say that lending isn't happening, it is but sometimes, repayments and write offs exceed new gross lending. For business lending as a whole, manufacturers have been borrowing significantly more on a net basis perhaps reflecting better opportunities in export markets, the rising cost of imported raw materials and more recently some stock building in anticipation of Brexit. That diversity is also reflected in different needs and these are increasingly met by a wide range of different types and sources of finance. Invoice finance and asset based lending continues to grow and advances against these assets are now comparable to total outstanding overdraft balances. For fast growth businesses looking for risk finance, equity finance may need to be part of the package. Over the last few years for early stage businesses, we?ve seen a doubling of investment from business angels and the bank capitalised Business Growth Fund investing from offices all over the UK, has invested £1.6bn.

Helping our members to support SMEs is one of the priorities for UK Finance and we have the guidance of an SME Advisory Group chaired by Teresa Graham CBE with representatives including the heads of major business groups to help direct our work. However 2019 pans out, there is no question that how the UK prospers will depend on our vibrant SME community.

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