In a significant turnaround for small business financing, lending to companies across the UK surged by 21% in the first half of 2024, marking the first positive trend in small business loans and overdrafts since the pandemic. Data from a recent report reveals a notable increase in lending in the South East, which saw a 10% rise in 2023. However, other regions continue to face challenges, highlighting a patchy recovery in business finance.

Last year, the number of approved loans nationwide fell by 9%, with steep declines noted in areas such as the North East and Wales. The total value of loans approved across the country also saw an 18% decrease. In contrast, the South East bucked this trend, achieving a 21% increase in loan values, contributing to an overall boost in economic activity in the region.

The British Business Bank (BBB) observed that while lenders are exercising greater caution in approving loans, businesses in the South East have successfully accessed vital financing. Louis Taylor, CEO of the BBB, emphasized that the increase in bank financing for small businesses includes notable growth in credit cards, overdrafts, and asset financing, which have experienced an almost post-COVID boom.

Despite the strong performance in the South East, Taylor acknowledged the ongoing challenges for small businesses elsewhere in the UK. High interest rates and cautious lending practices have hampered borrowing, particularly in the North East, which experienced a staggering 24% drop in loan volume during the first half of 2024, adding to a 37% decrease the previous year. This region, which houses crucial sectors like manufacturing and agriculture, has been disproportionately affected by the slow recovery in lending.

The report also highlighted a growing reliance on credit cards by small business owners, who increasingly turn to this financing option to address short-term needs amid restricted access to traditional loans. Although the demand for bank loans remains subdued, there has been a noticeable shift towards alternative financing sources. In the past year, 59% of debt funding for small and medium-sized enterprises (SMEs) originated from new lenders, including Starling Bank and Funding Circle, moving away from traditional banks like Barclays and Lloyds.

However, this evolving financial landscape has led to increased complexity for businesses seeking external financing. “Companies will have multiple relationships for different things,” Taylor noted, stressing the importance of guiding SMEs through this new terrain. Despite these challenges, 72% of small businesses continue to operate without external finance, a slight decline from 77% in 2022. Confidence in borrowing remains low, with only 33% of businesses expressing willingness to secure funds for growth.

As the British Business Bank celebrates its tenth anniversary, it has secured long-term funding of £7.9 billion to support businesses navigating this changing financial environment. Chancellor Rachel Reeves announced the commitment, which includes key initiatives like the £660 million Northern Powerhouse Fund, aimed at bolstering businesses across the UK.

With the South East leading the recovery in small business lending, hopes are high that the BBB’s new funding structure will help bridge the financing gap and promote economic growth in underperforming regions. Taylor concluded, “We now have £7.9 billion of commercially focused capital that will continue to invest in our economy, supporting the growth of earlier-stage companies and regional development.”

Whitbread, the FTSE 100 leisure group, has announced a 22% decline in pre-tax profits for the first half of the year, reflecting softer demand in the UK market. The company reported flat revenues of £1.57 billion for the six months ending August 29, with pre-tax profits dropping to £309 million. A notable factor in this downturn was a 7% decline in food and drink sales, attributed to a major restructuring of its restaurant operations.

Despite these challenges, Whitbread has reaffirmed its full-year guidance and remains optimistic about a potential recovery in the second half of the year. The company noted an increase in bookings for October and November, suggesting a rebound in consumer confidence.

As part of its growth strategy, Whitbread is focused on expanding its room capacity. The company plans to increase Premier Inn’s UK room count from 86,000 to 98,000 and double its presence in Germany from 10,500 to 20,000 rooms. To facilitate this expansion, Whitbread has accepted offers for 51 of the 126 restaurants it intends to sell. Additionally, plans are underway to convert 112 more restaurants into approximately 3,500 hotel rooms, with planning applications already submitted for a third of these new rooms.

The restructuring plan, which is expected to cost £500 million over the next four years, is reportedly “on track,” according to the company. Notably, Whitbread’s German operations have experienced a 21% revenue boost, driven by what the company describes as the “progressive maturity” of its hotel estate in that market.

Chief Executive Dominic Paul, who took the helm from Alison Brittain last year, expressed confidence in the company’s growth plans. “We are making excellent progress with our plans, and over the next five years, we are set to deliver a step change in our performance, which will fund significant returns to shareholders,” he stated. He emphasized a clear pathway for extending Whitbread’s market-leading position in the UK and capitalizing on favorable supply conditions.

As part of its commitment to returning value to shareholders, Whitbread has announced an interim dividend of 36.4p per share and a £100 million share buyback program. Founded in 1742 as a brewery by Samuel Whitbread, the company has undergone significant transformations over the years, selling its brewing business in 1999 and shifting its focus to hospitality. In 2019, Whitbread divested its Costa Coffee chain to Coca-Cola for £3.9 billion and has since expanded into the German market, which remains a crucial area for growth.

Following the announcement, Whitbread shares rose by 3.6%, or 111p, to £31.83, reflecting investor confidence in the company’s future prospects.