As the politically charged atmosphere of 2024 settles, the Autumn Budget provides a sense of closure, allowing small businesses to refocus on stability and growth. With the speculation behind us, the potential for a more stable economic environment may bolster confidence in the months ahead. This optimism aligns with predictions from the EY Item Club, which foresees a rebound in bank lending growth through 2025 and 2026. Following a contraction in bank financing last year, the consultancy anticipates net growth of 2.6% in 2024, climbing to 3.7% in 2025 and 4.3% in 2026.
These projections are contingent upon a continued decline in inflation and interest rates, a scenario widely expected unless major global disruptions occur. If these conditions hold, the UK economy is set to expand by 1.5% in 2025 and 1.6% in 2026. This steady recovery could enhance borrowing opportunities for businesses and strengthen the banking sector over time, creating a more favourable environment for small enterprises and commercial brokers.
The government’s Labour Budget, the first in 14 years, introduced measures that could support small businesses. Notably, the Corporate Tax Roadmap maintains the corporate tax rate at 25% while preserving investment reliefs, which could incentivise long-term business investments. For sectors like retail, hospitality, and leisure, the freezing of the small business multiplier for 2025-26 and a new 40% business rates discount (capped at £110,000) offer some respite, despite concerns about rising employer National Insurance contributions and the increased National Minimum Wage.
Encouragingly, the post-Budget atmosphere may inspire hesitant businesses to explore growth financing, mirroring the resurgence seen in the UK housing market. Commercial brokers, too, could experience a significant upswing as interest rate cuts fuel lending. Forecasts suggest a rise in bank lending to businesses, growing from 3.1% in 2024 to 5.6% in 2025. This improved lending climate, alongside reduced commercial mortgage rates, could create opportunities for businesses seeking to expand or refinance.
A Bayes Business School report highlights the demand for refinancing, with an estimated £170bn in loans requiring renegotiation over the next year. Coupled with a survey showing that 73% of brokers are optimistic about the future, the outlook for 2025 appears promising. However, turning this optimism into tangible growth will require strategic actions from brokers to capitalise on the anticipated opportunities.
The Autumn Budget has paved the way for economic recovery and growth opportunities for small businesses and brokers. With lending expected to increase and confidence on the rise, the coming years could mark a period of renewed investment and expansion. The challenge now lies in leveraging this optimism to create meaningful progress.
Duke Capital Limited (LON:DUKE), formerly Duke Royalty Limited, is a Guernsey-based provider of hybrid capital solutions for small and medium-sized enterprises (SME) business owners in the United Kingdom, Europe and North America, combining the features of both equity and debt.
