With traditional financial institutions increasingly moving away from long-term borrowing , many UK small businesses are using credit cards as an alternative . This trend is being compounded by the differing financial strength of financial institutions and how their costs change in response to monetary policy . This shift is reshaping the borrowing landscape , placing additional financial strain on businesses looking to access finance to support growth .

The Small Business Annual Index Report , developed in collaboration with leading global economist at the University of Chicago , Professor Ufuk Akcigit , and his co-authors , reveals that employment among UK small businesses ( one – nine employees ) fell for the second consecutive year , with 2,200 fewer jobs recorded in the previous 12 months to the end of October 2024 . The data underscores the challenges faced by small businesses in accessing affordable credit .

Employment decline : Small business employment fell by 2,200 jobs year-overyear , with total employment reaching 4,287,700 jobs .

• Sector winners and losers :

• Construction created 7,500 jobs (+ 1.24 %), emerging as the bestperforming sector

• Professional services added 6,500 jobs (+ 1.22 %), showing resilience amidst economic challenges

• Information & communication led the decline , shedding 6,700 jobs (– 3.79 %), followed by wholesale and retail trade (– 6,300 jobs , – 0.81 %)

• Regional Disparities :

• Wales was the only UK nation with small business employment growth , adding 400 jobs (+ 0.22 %). The other three UK nations all had declining employment

• The North East experienced the fastest decline (– 0.31 %), with 400 fewer jobs

• The Yorkshire and The Humber region bucked the trend , adding 700 jobs (+ 0.21 %).

The credit card trend :

Due to their accessibility , flexibility and ability to address immediate financial needs , credit cards are a vital source of financing for small businesses . In fact , they are currently the number one source of financing for small businesses in the UK . Twenty-seven percent used a credit card for financing over the past 12 months , while only 15 % secured a loan to fund their business expenses / growth . When asked about the proportion of expenses charged to credit cards , 33 % of UK small businesses are charging more than 25 % of their total monthly business expenses to credit cards .

Mind the ‘ income gap ’:

The Small Business Index Annual Report highlights a strong link between access to credit and employment growth . Small businesses that secured financing in 2024 were able to invest in their workforce and operations , whereas those without access experienced slower growth . However , interest rates and changing lending practices are making traditional loans harder to secure , with the report showing that higher interest rates have had an uneven impact on small businesses . �

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