A strong economic recovery from the Covid-19 crisis led to borrowing among small businesses falling off a cliff last year, reveals fresh figures published today.
Small firms took on £22.6bn in debt over the whole of 2021, down over 64 per cent compared to the previous year, according to figures from banking body UK Finance.
A sharp rebound in demand triggered by virus curbs gradually being rolled back throughout last year lifted businesses’ cash flow, reducing the need for them to take on debt to plug funding gaps.
In the second quarter of 2020, when the virus swept across the UK, small firms took on £34.5bn in debt, compared to just £5.2bn in the same period last year.
The government implemented loan-schemes that insured against losses to incentivise banks to channel funds into the private sector interest-free for the first year, boosting overall loan demand among businesses during the pandemic.
Applications for new loans and overdrafts in the final months of last year tailed off signalling improving trading conditions is weaning small businesses off of relying on credit to survive.