UK SMEs miss GBP £54 billion as finance confidence dips

Portman Finance Group has published research estimating that UK SMEs are missing out on GBP £54 billion in revenue because they lack confidence in using external finance, pointing to missed growth opportunities across the sector.

The broker-lender surveyed 2,000 financial decision-makers at UK SMEs and found that 30% had missed a growth opportunity because they did not access outside funding. Those businesses said they had lost more than GBP £73,000 in revenue on average, which Portman used to estimate a GBP £54 billion shortfall across the wider SME population, excluding sole traders.

The findings suggest broad reluctance to borrow, even among companies that recognise the need for finance. Four in ten businesses that considered external finance either proceeded for only part of the amount they originally wanted or did not proceed at all.

Confusion over products, low trust in providers and fear of rejection were among the main reasons. More than half of respondents (53%) said the business finance market was confusing, while 66% said they would be more likely to borrow if they better understood the options available.

Trust was also weak across several parts of the market. The research found that 52% did not have complete or high trust in high street banks for business finance advice, while trust was lower for finance brokers at 43%, challenger banks at 41% and venture capitalists at 40%. More than one in five respondents, 21%, said lack of trust in lenders was the main reason for not taking external finance.

Fear of rejection also appeared to deter applications, with one in five SMEs saying concern about being turned down had discouraged them from applying in the first place.

IT sector

Within IT and telecoms, the data indicated greater openness to borrowing than in some other parts of the economy, provided businesses had better information. Portman surveyed more than 200 SMEs from the sector as part of the wider study.

Among those companies, 78% said they need external finance to grow. Another 77% said they would be more likely to borrow if they better understood the options available, while 67% said they rely on finance providers to choose a product suited to their situation.

Even so, 35% of IT and telecoms businesses said they had missed a growth opportunity because they lacked confidence in external finance, suggesting a gap between willingness to borrow and confidence in navigating the market.

The report also linked financing decisions to broader economic uncertainty. Nearly eight in ten SMEs (79%) said geopolitical conflict had delayed decisions about taking on external finance.

Cost was another barrier. Almost half of respondents, 48%, said high interest rates were the main reason for not proceeding or only partly proceeding with a loan application, while 32% said they did not want to put financial stability at risk.

Portman argued that the effect reaches beyond individual businesses because delayed borrowing can hold back spending on expansion. Missed funding decisions can lead companies to postpone investment in technology, delay recruitment or avoid buying equipment.

That matters for the technology industry, where smaller firms often depend on outside finance to fund software investment, infrastructure purchases and hiring. The survey indicates that demand for finance exists, but many businesses remain unsure which products fit their needs or which providers they trust enough to approach.

Portman was founded in 2007 and says it has arranged more than GBP £1.5 billion in funding for UK businesses. It operates as both a lender and a broker in the SME finance market.

"UK SMEs are highly ambitious and understand the role that finance can play in helping them realise these ambitions, but too many are putting investment plans on hold because the market feels confusing, untrustworthy, and have a fear of debt altogether," said Alex Read, Founder and Chief Executive Officer of Portman Finance Group. "This is having a very real impact on the UK economy. Behind the £54 billion figure are thousands of businesses delaying expansion, postponing investment in technology, holding back recruitment or deciding against buying new equipment, all of which drives business and economic growth which is much needed in the UK, and high on the political agenda."

Read also called for more guidance from lenders and intermediaries.

"This isn't about encouraging businesses to borrow more, but helping them make more informed decisions. We are calling on brokers, lenders, and banks to do more to educate SMEs and help businesses understand which options are right for them. That means taking a more consultative approach - understanding what a business is trying to achieve, explaining the options available, and being honest about what is and isn't suitable. If we can close that confidence gap then we have a real opportunity to unlock investment and provide a major boost to the UK economy."