Atom Bank’s quarterly SME Pulse report for the three months to June revealed a 7% drop in the proportion of respondents who had seen an increase in appetite from their commercial clients.
The number of brokers who saw no change rose from 44% to 49%. The majority of respondents who noted a slowdown in lending (75%) cited economic uncertainty as the main reason for the drop in demand.
However, brokers also raised growing concerns about UK inflation levels.
The Office for National Statistics (ONS) reported higher-than-expected inflation figures for the year to June, with the Consumer Prices Index (CPI) rate rising to 3.6% – the highest level since January 2024.
Half of the brokers polled were themselves concerned about continued higher inflation, while more than a third (35%) said it was reducing confidence among their commercial clients towards undertaking new purchases or refinancing existing ones.
Aldermore Insights with Jon Cooper: Edition 4 – Budget 2025: Landlords feel the heat, brokers to steer the market
Sponsored by Aldermore
Almost two-thirds of brokers who responded to the survey said property purchases were the most common purpose for borrowing among SMEs, ahead of growth and business expansion (16%) and refinancing existing debt (14%).
Brokers said access to funding, however, is getting easier.
A fifth of brokers reported finding it difficult to secure funding for SME clients, the lowest proportion since the SME Pulse was launched in 2023. Brokers noted the wide range of lenders active in the commercial space as a factor in this improved access.
Impact of Trump’s tariffs
Brokers were asked about the extent to which their business clients were concerned about the prospect of tariffs with the US.
Around a quarter (24%) reported concern among their clients, though almost half (46%) said their clients were completely unfazed by the situation.
Nearly half (45%) of respondents said their clients were talking at least occasionally with brokers about the opportunities or challenges presented by recent trade deals with the likes of the EU, US and India.
The rise of PBSA
More than a quarter (28%) of brokers reported seeing increased demand from property investors for funding in order to support expansion in the purpose-built student accommodation (PBSA) sector.
A similar number (22%) suggested that PBSA now accounts for between 10% and 20% of their business.
Atom Bank recently improved its PBSA proposition to provide more favourable terms and maximum loan to values (LTVs) than are available on comparative house of multiple occupation (HMO) cases.
For more on PBSA, read Neil Leitch’s blog on how he has seen increasing interest in PBSA from experienced developers at Hampshire Trust Bank (HTB).
Tom Renwick, head of business lending at Atom Bank, said: “The current economic climate, marked by persistent uncertainty, understandably is contributing to a perceived softening of demand among brokers. However, it’s crucial to highlight a key finding: a minimal number of brokers have reported an actual decline in demand. This distinction underscores the inherent robustness of the market. Despite challenges such as elevated inflation and potential tariffs, a significant number of businesses remain confident in their ability to pursue ambitious growth strategies.”
