Our Monthly Index on the State of UK Credit Autumn Budget special: November 25 The view from Experian In the run-up to the Autumn Budget, a two-speed dynamic was evident in SME lending. While overall lending volumes to SMEs expanded year-on-year, “borrowing for growth” (high-value loans and asset finance linked to longer-term investment) slowed, with uncertainty over potential taxation acting as a drag on investment decisions. However, we continued to see solid growth in products targeted at meeting SMEs’ day-to-day financial needs, with credit card and revolving debt up 17% since the end of 2024, even as overdraft utilisation edged lower. The Budget has now removed some of the uncertainty contributing to that investment borrowing slowdown and, in doing so, delivered a mixed picture for businesses. On the positive side, there are no increases in corporation tax, and permanent business rate cuts from April 2026, alongside a £4.3 billion support package intended to ease pressure on retail, hospitality, and leisure sectors. However, changes to property valuations used to calculate business rates will likely see significant increases for many high street businesses next year, coupled with the end of the 40 per cent rate discount ending in April. This, together with cost headwinds stemming from the National Living Wage rise next year, will affect the very same businesses. Going into the Budget, delinquency and default rates remained broadly stable compared to earlier peaks, with only a marginal uptick in recent months – largely consistent with lenders’ increased risk appetite. Challenger banks and FinTech lenders continue to gain share, offering flexible solutions for working capital needs, while traditional banks remain selective. Overall, the lending environment is supportive for short-term liquidity but constrained for long-term investment, reflecting persistent uncertainty and elevated borrowing costs. Recent PMI data underscores the fragile backdrop. The Composite PMI slipped to 50.5 in November, signalling near-stagnation, with services growth at its weakest in seven months amid client caution. Manufacturing returned to marginal expansion at 50.2, supported by domestic demand, but employment fell sharply. Construction remains in contraction, dragged down by weak order books and delayed projects. Business investment fell 0.3% in Q3, contrasting with stronger public-sector-led growth. This divergence suggests firms paused major spending ahead of the Budget, awaiting clarity on fiscal policy and interest rates. While the Budget’s incentives may unlock deferred projects, margin pressures and muted demand imply only gradual improvement. Taken together, the lending environment and fiscal measures will likely continue to cause ongoing fragility for some businesses. Access to short-term finance remains robust, and government incentives aim to spur capital investment. Yet, rising labour costs, fiscal drag, and tax changes will challenge profitability, particularly for labour-intensive sectors. Businesses that proactively leverage reliefs, optimise funding strategies, and adapt workforce planning will be best positioned to navigate this period. The Budget offers stability rather than transformation – providing a framework for incremental growth if firms act decisively to manage risks and seize opportunities. Written by Gareth Rees, Head of Commercial, Credit & Risk, Experian Source: OBR, Experian Forecasts Key UK Economic & Commercial Credit Metrics Autumn Budget: Rising cost pressures with targeted relief. On 26th November, Chancellor Rachel Reeves delivered the Labour government’s 2025 Autumn Budget, signalling higher cost pressures for most businesses. To begin, income tax and NIC band freezes until 2030–31 will deepen fiscal drag while eroding consumer spending. This is likely to drive wage pressures that further raises labour costs and curb investment appetite. Labour-intensive sectors face further strain from an April 2026 minimum wage rise, following higher employer NICs in 2025, forcing retail and hospitality firms to weigh staff cuts against price increases. Remuneration structures also tighten: from 2029, salary-sacrificed pension contributions above £2,000 incur a 15% employer NIC charge, while dividend tax rates rise by two points from April 2026, reducing directors’ and investors’ returns. On the upside, a permanent business rates cut from 2026 offers relief for retail, hospitality, and leisure, supported by a £4.3bn package. Meanwhile, UK corporation tax remains at 25%, the lowest within the G7. Source: OBR, Experian Forecasts Business Investment: Private investment slipped again as firms awaited budget clarity, while GFCF surges further. UK business investment fell by 0.3% quarter-on-quarter in Q3 2025 and is now just 0.7% higher than a year earlier. In contrast, wider Gross Fixed Capital Formation (GFCF) grew strongly, rising 1.8% on the quarter and 3.8% year-on-year. This divergence since Q2 suggests that while overall capital spending held up, firms delayed major investment ahead of the Autumn Budget amid uncertainty over fiscal policy, interest rates, and fears of higher corporate taxes. Thankfully, these concerns have largely not materialised. The Budget’s measures, including a permanent 40% First Year Allowance, retention of the £1m Annual Investment Allowance, and extended reliefs for zero-emission vehicles and infrastructure, should modestly help confidence, though the impact will be gradual. There may also be a pent-up demand effect as postponed projects resume, but whether these incentives and deferred demand reverse the recent weakness depends on how quickly firms act under the new post-budget framework and wider economic conditions. Meanwhile, GFCF has been supported by strong public sector infrastructure and housing investment, which was further bolstered by the Budget announcements. Source: ONS PMIs: Muted pre-budget activity in November as PMIs signal near-stagnation despite manufacturing uptick The UK’s latest provisional Purchasing Managers Index (PMI) readings, produced just before the Autumn Budget, points to further muted activity in November. The Composite PMI fell to 50.5 from 52.2 in October, signalling near-stagnation. The services PMI slowed to 50.5, its weakest growth in seven months amid client caution ahead of the fiscal announcements. However, the manufacturing PMI returned to expansion for the first time in over a year at 50.2, supported by domestic demand, though employment fell at the fastest rate in four months. Construction remains weak, with October’s PMI at 46.2, driven by weak order books and investment delays. Civil engineering and residential building continue to drag performance. Looking ahead, the Autumn Budget impact on PMIs will be mixed. Higher labour costs and fiscal drag may weigh on services and hospitality, while business rates cuts and stable corporation tax could support retail and leisure. Manufacturing may benefit if investment incentives lift confidence, but overall margin pressures suggest that PMIs will stay close to stagnation without relief measures to spur spending and hiring. Source: S&P Global CIPS Key UK Commercial Credit Metrics (Asset Finance, Credit Cards/Revolving Credit, Loans, and Mortgages) Metric 2019 2020 2021 2022 2023 2024 2025 Variance to 2024 (Year end) (Year end) (Year end) (Year end) (Year end) (Year end) (Sep 2025) (%) Average Commercial Delphi Score 44 42 42 42 42 42 42 1.9% Median Commercial Delphi Score 40 36 37 36 36 35 37 5.7% Average credit card/revolving credit utilisation rate 100 82 103 109 110 107 105 -2.0% Average overdraft utilisation rate 100 65 83 90 86 85 82 -3.6% Proportion of current accounts overdrawn 100 60 78 80 77 72 58 -19.5% Average asset finance debt 100 102 111 118 138 146 147 0.7% Average credit card/revolving credit debt 100 99 157 172 209 237 278 17.3% Average loan debt 100 113 138 136 138 129 126 -2.3% Average mortgage debt 100 90 98 99 95 96 100 3.4% Average non-mortgage debt 100 105 123 120 125 122 123 0.4% Status 2+ delinquency rate 100 131 109 108 123 132 123 -7.0% Default rate 100 102 84 99 119 142 138 -2.2% The view from Experian There has been a marginal deterioration in delinquency and default rates this month, although the position remains favourable on the year-end position. Importantly, where we are seeing a headline tick-up in delinquency rates, overall performance appears in line with additional risk appetite from lenders. We continued to see a two-stream lending market for SMEs in the run up to the UK Budget. Businesses are showing caution in making large investment decisions, but there remains substantial demand for borrowing to meet SME’s day-to-day financial needs. This split in the market has contributed to a year-on-year expansion in lending volume in the latest period, but a year-on-year contraction in the amount lent to SMEs. This continues to feed into rising levels of revolving credit debt. For more in-depth insights, read our latest credit trends report FIND OUT MORE OR CONTACT US today to arrange a meeting ;