Challenger share holds at sixty per cent
For the second year running, challenger and specialist banks held 60% of UK gross SME bank lending in 2025. The big-five banks' gross lending, at £27bn, sat at its third-lowest level on record. The shift has settled, and a borrower's search strategy should reflect that.
- Dated
- 19 March 2026
- Desk note
- Dated to the data
- Reading
- 6 min
Managing Director
Challenger and specialist banks held 60% of UK gross SME bank lending in 2025, the second year in a row at that level, according to the British Business Bank’s March 2026 report. Their gross lending hit a nominal record of £40bn; the big-five banks lent only £27bn, their third-lowest since the series began. Rather than reversing, the shift has matured into a new steady state, and a borrower’s search strategy should already reflect it.
What happened to the decade-long climb?
From 2012 to 2024, the challenger and specialist bank share of UK gross SME bank lending moved in one direction. It started at 39%, crossed half for the first time in the late 2010s, dipped to 32% in 2020 as Covid-scheme money flooded through the big-five, then resumed its rise: 51% in 2021, 55% in 2022, 59% in 2023, 60% in 2024. The 2025 data, published in the BBB’s annual markets report in March 2026, shows the first plateau in over a decade: 60%, unchanged.
The challenger share reached 60% in 2024 and held there in 2025, the first plateau in more than a decade of gains.
| Year | Challenger & specialist share (%) |
|---|---|
| '12 | 39% |
| '18 | 51% |
| '20 | 32% |
| '21 | 51% |
| '22 | 55% |
| '23 | 59% |
| '24 | 60% |
| '25 | 60% |
- Challenger & specialist banks' share of gross SME lending
Share of gross UK SME bank lending (excl. overdrafts) by challenger and specialist banks. All points are BBB/BoE published figures except 2018, which is illustrative: the report described challengers as having reached around half in 2017–19 without quoting an exact decimal for 2018. The 2020 dip reflects Covid-scheme lending routed almost entirely through the big-five.
Source · British Business Bank, Small Business Finance Markets 2025/26
A plateau is not a retreat. The BBB attributes the flat share partly to the overall lending market growing: total gross SME bank lending rose 9% in 2025 to £68bn, its second-highest nominal level since records began in 2012. Challenger gross lending grew alongside that, reaching £40bn. What did not grow was their share, and that is the more informative signal. After a decade of structural shift, the field appears to have found its new equilibrium.
The 2020 dip in challenger share is the exception that proves the structural rule. When government-guaranteed Covid schemes were deployed, the money was routed overwhelmingly through the big-five clearing banks (Barclays, HSBC, Lloyds, NatWest and Santander), temporarily reversing a decade-long trend. The 2021 recovery to 51% and the subsequent climb confirmed the underlying dynamic was intact.
What the absolute numbers show
The share series tells one story; the absolute lending volumes tell a complementary one. In 2021, as challengers recrossed 51% of the market, the total SME bank-lending pool had normalised to £57.7bn after the Covid spike. By 2025, that pool had grown to £68bn. Challenger gross lending grew with it.
Challengers lent a record £40bn to UK smaller businesses in 2025; the big-five lent only £27bn, their third-lowest since 2012.
| Year | Big-five high-street banks | Challenger & specialist banks | Total |
|---|---|---|---|
| 2021 | £28bn | £30bn | £58bn |
| 2022 | £29bn | £36bn | £65bn |
| 2023 | £24bn | £35bn | £59bn |
| 2024 | £25bn | £37bn | £62bn |
| 2025 | £27bn | £40bn | £67bn |
- Challenger & specialist banks
- Big-five high-street banks
Gross SME bank lending (excl. overdrafts), split by lender type, in nominal £bn. 2025 challenger (£40bn) and 2025 big-five (£27bn) are both directly quoted in the 2025/26 BBB report. 2024 challenger (£37.3bn) is directly quoted; 2024 big-five (~£24.8bn) is derived from the stated total (£62.1bn) and is therefore illustrative. 2021–2023 challenger figures are derived from the published total and published share percentage; their absolute values are illustrative.
Source · British Business Bank, Small Business Finance Markets 2021/22 and 2025/26
The big-five’s absolute lending to UK smaller businesses has not recovered. At £27bn in 2025, it sits at its third-lowest level since the series began. A CFO who still thinks of the high-street clearing bank as the natural majority supplier of their sector is working from a map that is more than a decade out of date.
£40bn
Gross lending by challenger and specialist banks to UK smaller businesses in 2025, a nominal record, against the big-five's £27bn, their third-lowest since 2012.
Source · British Business Bank, Small Business Finance Markets 2025/26 (March 2026)
What does the plateau mean for a borrower?
The plateau changes the framing of the structural story but not its practical conclusion. For most of the past decade, the message was “the market is shifting; challengers are taking share.” That dynamic is now complete enough that the shift itself is the settled baseline. Sixty per cent has stopped being a transitional figure on its way somewhere and become the resting level.
The BBB’s 2025/26 report adds a further number that sets the bank discussion in context: when non-bank lenders are included (asset finance providers, direct lenders, private-credit funds), over two-thirds of all UK SME lending now comes from outside the big-five. The bank-only challenger-share series is, in that sense, already a partial view of the market a £3–15m borrower actually faces.
The big-five supplied 40% of new bank lending in 2025. They are one part of the market, not the whole of it.
What the new lending numbers did not change
Sixty new banking licences were granted in the UK in the decade to 2023, 36 of them to institutions serving smaller businesses. That structural supply of new lenders is not reflected in any single year’s data but in the accumulated depth of the field available to a borrower running a process. The 60% challenger share, however stable it now looks, is the output of that expanded field, not a ceiling on it.
For a CFO planning a refinancing or a new facility into 2026, the practical implication is narrow: the default assumption should be that the market is plural, not that the incumbent bank is the market. The incumbents are competing in a field where they supply a minority of lending. Treat them as a starting point, not the destination.
Questions a CFO asks
Common questions
- Does a plateau at 60% mean challengers have stopped growing?
- In share terms, yes, at least for now. But in absolute terms, challenger gross lending rose to a nominal record of £40bn in 2025, because the total market grew. The plateau is a sign of structural maturity, not retreat: the shift from the big-five to challengers appears to have settled into its new equilibrium rather than continuing its decade-long climb.
- Should I still go to my high-street bank first?
- There is no structural reason to. The big-five supplied 40% of new bank lending in 2025, a minority. For a given credit the incumbent may still be the right lender on price and relationship, but that can only be confirmed by comparing it to the wider field. Defaulting to the relationship bank without testing the market means missing the 60% of supply that may compete harder for your business.
- What does 68% of overall SME lending from non-big-five sources mean in practice?
- Including non-bank sources (asset finance, direct lenders, private-credit funds), the British Business Bank puts over two-thirds of all UK SME lending outside the big-five in 2025. For a £3–15m facility, the choice set is already plural by default. The question is not whether the market has alternatives; it is whether a company has a process to find and compare them.