Editor's note: This brief was summarised by The Property AI Newsroom from a report by Mortgage Solutions. Read the original article for full details.

Q2 SME lending hits post-pandemic high of £5.35bn but remains below 2019 levels

Gross lending to SMEs reached a post-pandemic high of £5.35bn in Q2 2026, according to UK Finance's Business Finance Review. Lending was more than 25% higher than a year earlier and broadly flat on Q1, the 10th consecutive quarter of year-on-year expansion.

Growth driven by real estate

UK Finance said annual growth among the main high street lenders accelerated to 26%, the fastest rate since early 2024. The trade body attributed the increase to strong loan approvals and resilient economic activity.

Real estate was identified as a key driver of growth, with professional services also contributing positively. The sector is underpinning the current expansion in SME finance.

Confidence hit by geopolitical tension

Despite the headline growth, UK Finance said the Middle East conflict and the resulting energy price shock weighed on business and lender confidence. Activity slowed in May and June as oil prices and financial market volatility increased.

Lending to medium-sized firms remained resilient overall, but Q2 saw a decline in lending to small firms compared with Q1, though this was still higher year-on-year.

David Raw, managing director of commercial finance at UK Finance, said: "The continued growth in SME financing since the pandemic is evidence of the sector's resilience and testament to the collaboration between banks and businesses."

He added: "Amid continued geopolitical tension, small businesses' confidence inevitably took a bigger hit, and a more cautious business outlook across the sector reflects the uncertainty businesses face going forward and the impact this has on SME lending."

Still below pre-pandemic levels

Although Q2 lending reached a post-pandemic peak, SME lending by the main banks remains below pre-pandemic levels. In real terms, lending in the first half of 2026 was still around a third lower than the 2019 average, according to the report.

For letting agents and inventory clerks, the figures suggest continued appetite for property-related SME finance, but a more cautious outlook among small businesses amid ongoing economic uncertainty.