Reward Funding’s Economic Outlook – September 2025 – by Nick Smith
When others step back, we step forward. Against a backdrop of sluggish growth, fiscal tightening and heightened interest rates, Reward has continued to push lending volumes and SME support to record levels. Our loan book has now reached £350m, proof that SMEs don’t need cautious partners in tough times like these, they need the right kind of lender who can act decisively when the stakes are high. That is what we pride ourselves on. Our record lending is not despite the current market and economic challenges, it is because of it.
The UK and worldwide economy have suffered significant turbulence in recent years, and it has tested every business in the country. Recovery from the pandemic was reduced by inflation pressures and the war in Ukraine, while political missteps such as the brief Truss premiership collapsed confidence in the UK economy and interest rates have climbed to heights not seen in decades.
The Bank of England’s aggressive stance on rate hikes to 5.25% in August 2023 helped to steady the shop slightly, but growth has remained disappointing ever since. Even as inflation fell in 2024, GDP growth remained weak at just 0.9%, only 3.2% above the pre-pandemic level in 2019 (the second lowest in the G7). Rachel Reeves’s “unbreakable” fiscal rules have meant the burden of increased lending and costs has fallen firmly on businesses. Higher employee NICs, increased capital gains tax and a rise in SDLT have all made life much tougher for entrepreneurs and businesses already facing an uphill battle.
This burden, and overall cautious approach, is showing up in boardrooms. Rising labour costs, fuelled by the increased NIC thresholds and minimum wage hikes, have eroded the already slim profit margins and deterred investment. In July 2025, a survey by the British chamber of Commerce (BCC1) found that 24% (2024: 14%2) of businesses have cut back on investment in the previous 3 months, while only 21% (2024: 25%) have increased investment.
For those still looking to invest and grow, the rigid box ticking approach from traditional lenders is becoming more of a deterrent. This is where Reward steps in when others step away. Flexibility in lending is now a necessity for businesses, especially in cases of revolving facilities and customised deals to meet each specific set of needs. In sectors like hospitality, retail and construction, which are often written off by mainstream lenders in recent months due to higher levels of risk, we see experiences operators with viable growth plans. Our relationship-led approach means we don’t just look over a spreadsheet, we sit with the owners, understand the pressures they are under, and move quickly when the plan makes sense.
Beyond the struggles in the UK, the global picture adds more pressure. The BoE3 found that Trump’s recent tariffs have left around 60% of UK exporters expecting sales to fall over the coming year. Leading forecasters like KPMG4 and the OBR5 have already revised expectations downwards. For SMEs, this is just another layer of uncertainty.
This is why Reward’s role is critical. We are not here to mirror the banks or wait for better conditions to return. We have proven time and time again that our instinctive and pragmatic approach works when others freeze and step back. We move at the pace of business, not tied with restrictions and red tape, and will continue to back ambitious SMEs who refuse to stand still.
2026 remains highly unpredictable but one thing is clear, SMEs don’t just need any finance, they need the right kind of finance to thrive in an uncertain world. At Reward we will continue to provide it, decisively, pragmatically and with strong belief in the businesses we back.
