Despite the sunny weather providing some respite for retailers, The British Retail Consortium (BRC) reports growth in May was “the slowest growth in 2025 so far”.
With the cost of living continuing to put pressure on consumer spending, it remains a challenging time for wholesalers and the retail sector more broadly.
So, how can the sector respond to these challenges, writes Gareth Anderson, Head of Business Management, Allica Bank.
Many of the businesses I speak to realise that investing in growth can be a key differentiator in a difficult market. Technological innovations can streamline processes and unleash productivity and new outlets in areas with greater footfall can give sales a boost.
Many businesses looking to invest and grow however are seeing their ambitions frustrated by high street banks which have, in recent decades, scaled back business lending. This is especially true for established SME retailers with between 5 and 250 employees, who make up the majority of the sector.
The Lending Gap
Research recently undertaken by my own team at Allica Bank has shone a light on the scale of the UK’s business lending gap.
We discovered that the proportion of established businesses applying for external finance has fallen markedly from 65% in the late 1980s to just 25% between 2022-24. The UK now has some of the lowest application rates for business finance in recorded history. Business loan rejections have also risen from between 5-10% three decades ago to 40% today.
This has left the UK with a £65 billion business lending gap. For the retail sector, this means that lending to wholesalers and retailers is some 23% lower than it would have been if the high-street banks hadn’t pulled back in recent decades.
Unlocking Opportunity
Alongside a decline in business lending over recent decades, there has however been another more positive trend in the banking sector. This is the emergence of a new generation of challenger banks like ours which are willing to plug the SME lending gap. 60% of established business lending now comes from challenger banks and this trend is only likely to continue.
This means there are things retail and wholesale businesses can do to raise finance and invest in growth, despite the challenging circumstances we find ourselves in.
One crucial thing is simply to shop around. While the high-street banks might have retreated from high-street lending, preferring instead to focus their attention on big, corporate retailers, there are alternatives out there. My own team for example has built a reputation for bringing back the business banking of old, but with all the advantages that modern technology and processes afford us.
For our team this means taking the time to really understand a business, rather than get stuck in the ‘computer says no’ mindset that seems to have crept up on the high street banks.
Wholesale and retail businesses looking to raise capital should therefore invest the time needed to ensure books, cash flow and growth forecasts are accurate and up to date. Good accounting goes a long way here, especially when speaking to a banking partner that is willing to know your business if all the information is available.
Not on the High Street
Beyond the high-street banks there are a wide range of potential options when it comes to raising money to invest.
In my own team for example, we see many wholesalers borrowing against invoices. Invoices demonstrate the ongoing value of a business even if, temporarily, the overall balance sheet is being impacted by wider economic circumstances. Similarly, many businesses, especially in the wholesale sector, might have assets that can be borrowed against as a means of unlocking value. Whether its warehouses and property or fleets, these assets can be a great way to raise the finance needed to invest in tech and next generation assets that a changing economy demands.
There are options then for the nation’s wholesalers, even against the backdrop of the UK having – according to the OECD – the lowest business loan application rates and the lowest business investment rate in the G7. Unlocking this finance will be key to unlocking further growth, productivity and innovation in the UK’s wholesale and retail sectors. Whether it’s AI inventory or supply chain optimising tech tools, there are a growing number of options available for those businesses looking to innovate.
Business lending has deteriorated significantly in recent decades impacting the whole economy and retail is no exception. Thankfully, the banking market is more diverse than it used to be and banks like Allica are enthused about backing British businesses and giving the country the investment it needs. This is vital not just for the many established wholesale and retail businesses across the country and the jobs and communities they support, but for the UK as a whole.
Businesses looking to unlock this growth should invest the time now in ensuring that the true value of their business is accounted for, and in searching for banking partners capable of recognising that value.
Comments are closed.