How has net financing for UK businesses changed during the pandemic?

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Published on 16 November 2021
UK businesses have weathered the pandemic by raising finance from banks, financial markets and government schemes. Now, many have begun to repay their loans.

Since March 2020, UK businesses have raised around £77 billion of net additional financing from UK banks and global financial markets, materially higher than the average raised in recent years. This finance, alongside wider government support, has helped businesses to weather the pandemic.

The combination of financing and government support has also led to an improvement in UK businesses’ aggregate liquidity positions. Overall, businesses’ cash balances have increased by around £180 billion (over a third) since March 2020.

This improvement in cash positions is likely to partially explain businesses’ muted demand for credit in 2021, relative to 2020.

Large businesses have made small net repayments of bank loans so far in 2021 and net capital market issuance has been broadly unchanged. At the same time, small and medium-sized enterprises’ (SMEs’) net borrowing has reduced materially to around negative £0.5 billion per month in 2021, compared to positive net borrowing of £3.6 billion per month in 2020.

Overall, monthly net financing raised has been mainly negative since March 2021 (Chart A). This means that, in aggregate, businesses have started to repay more finance than they raise.

While net financing raised by businesses increased materially during the pandemic, especially for SMEs, this led only to a moderate increase in the level of aggregate corporate debt. However, this moderate increase in indebtedness is likely to have increased the number and scale of vulnerable businesses. Overall, the Financial Policy Committee judges that UK corporate debt vulnerabilities have increased moderately, in aggregate, as a result of the Covid-19 pandemic.

Chart A: In aggregate, companies have started to repay more finance than they raise

Net finance raised by UK private non-financial corporations per month (a)

Bar chart that shows net finance raised by UK private non-financial corporations every month split between bank loans and capital market issuance. From January 2018 to March 2020, Net finance raised is steady, but then rises dramatically with large amount of bank lending and then capital market issuance. As of March 2021, however, overall monthly net financing raised has been mainly negative.


  • Sources: Bank of England and Bank calculations.
  • (a) Seasonally adjusted. There is a discrepancy between the total of net finance raised and its components due to the seasonal adjustment methodology.

This post was prepared with the help of Philip King and Sienna Holcombe.

This analysis was presented to the Financial Policy Committee in July 2021. The latest data included in this analysis is for September 2021.

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