North West tops lending league as ecosystem remains strong says bank chief

The regional manager of the British Business Bank in the North West says the region has shown the largest increase in use of external finance compared to the rest of the UK.

Citing evidence from the British Business Bank’s Small Business Finance Markets 2024/25 report, published today (Tuesday 4 March 2025), she said usage of external finance by smaller businesses in the North West increased by 8 percentage points in the first half of 2024.

Delyth Edwards, Senior Network Manager, North West England, British Business Bank, said: “Businesses across the UK have been operating in more challenging economic conditions in recent years, but the North West business ecosystem remains active and strong. We had the largest increase in external finance usage out of all UK regions, demonstrating the North West’s resilience in the face of strong economic headwinds.

“The report highlights how the North West is strengthening the UK’s economy and helping further solidify the North as a thriving investment hub outside of the capital. It’s great to see businesses remain optimistic and ready to unlock even more growth in 2025. We’re already feeling this uptick in sentiment through the deployment of the Northern Powerhouse Investment Fund II, with a number of ambitious North West businesses benefitting from funding over the last year.” 

The region saw the UK’s highest share of smaller businesses using external finance at 55%, increasing from 47% in the second half of 2023. This is the highest increase reported and places the North West as one of only three regions in the UK – alongside the East of England and Yorkshire and the Humber – to see an increase of over one percentage point in the use of external finance. 

However, a mixed picture emerged when looking at the usage of different forms of finance. Bank overdraft and loan usage increased by 5 percentage points to 19% and 1 percentage point to 8% respectively. However, credit card usage saw a moderate decrease of 2 percentage points to 17%.

Smaller businesses’ propensity to consider using finance for growth purposes  also grew across the North West in the first half of 2024. 33% of smaller businesses reported they would be happy to use external finance to grow, increasing from 31% in the second half of 2023. 

Despite this improving sentiment, equity deal activity declined in 2024. In the first three quarters of 2024, 86 equity deals were completed across the North West, a decline of 12.2% compared to the first three quarters of 2023. However, the total value of those deals rose by 36.9% to £237.2m over the same period, indicating a shift towards larger investments.

Overall, the proportion of smaller businesses accessing finance fell from 50% in Q3 of 2023 to 43% in Q2 of 2024, most likely due to business confidence remaining low despite some recent economic growth.

The report also finds that smaller businesses generally invest less than larger businesses relative to their turnover. In 2024, smaller businesses invested an estimated £12.3bn, while larger businesses invested 2.25 times as much (£27.7bn), despite larger businesses contributing slightly less turnover to the economy (48%) than smaller businesses (52%). 

The report finds that smaller businesses who believed they have underinvested most commonly cited ‘credit being too expensive’ (58%), or that they ‘could not borrow at a reasonable rate’ (55%) as key factors for not investing in their business. 

77% agreed that they would accept a slower growth rate rather than borrowing to grow, with only 7% disagreeing, suggesting a strong aversion to taking on debt for investment. 

Louis Taylor, CEO, British Business Bank, said: “It is clear that conditions are not easy for smaller businesses, with some domestic uncertainty meaning many were less willing to invest with confidence in 2024. 

“If we are to achieve the growth we all want in the UK economy, it is important that we continue to make the case for business investment which can help drive economic growth, lift wages and improve living standards. 

“The diversity of supply of finance, in terms of both product and provider, is an important factor in meeting the diverse needs of the UK’s highly varied smaller business community. The increasing role for challenger banks in 2024 is an encouraging sign, as is the continued rise of asset finance. 

“The findings from this report further emphasise the need to ensure smaller businesses across the UK’s Nations and regions have better access to the finance they need to invest. We will continue to support UK economic growth by helping them find the capital they need to start up, scale up and stay in the country as they realise their full potential.”