Post-Brexit lending to rural SMEs slumps, new study reveals
Regional inequality deepens as small firms in rural and export-reliant areas suffer finance contraction
A NEW academic study has revealed a sharp decline in lending to small and medium-sized enterprises (SMEs) in rural and peripheral areas of the UK following the Brexit vote—worsening already entrenched regional inequalities.
The research, conducted by Bangor University and the University of Liverpool, shows a 4.8% annual contraction in SME lending in the years after the Brexit referendum compared to similar European economies. The findings have been published in the Journal of Rural Studies.
The decline was particularly pronounced during key Brexit milestones—such as the triggering of Article 50 and the passage of the EU Withdrawal Bill—highlighting the prolonged uncertainty caused by the UK's departure from the EU.
Researchers used detailed postcode-level data from UK Finance to assess the geographic impact, marking the first such study to link Brexit with regional disparities in SME lending. The analysis found that peripheral and rural Local Authority Districts, as well as regions with high EU export dependency, experienced disproportionately severe reductions in credit access.
In 2016, 2017, and 2018, these areas saw lending shrink by 5.15%, 3.28%, and 1.97%, respectively.
The five worst-affected Local Authority Districts in 2016–2017 were: Derbyshire Dales, Hambleton, Mid Suffolk, Stratford-on-Avon, and Dumfries and Galloway.
Cem Soner, Doctoral Researcher at Bangor Business School, said:
'The initial fallout of Brexit—such as currency drops and market instability—was immediate. But our research shows the longer-term damage, especially to local economies dependent on EU trade. The evidence underscores the need for region-specific policies to help SMEs in these vulnerable areas recover.'
Professor Rasha Alsakka, who leads the Credit Risk Research Group at Bangor Business School's Institute of European Finance, added:
'SMEs are the backbone of the UK economy, especially in rural regions. If the government is serious about levelling up, it must act on this data to ensure that all areas have fair access to finance.'
Dr Noemi Mantovan, Senior Lecturer in Economics at the University of Liverpool, said that access to finance is critical for SME resilience:
'Despite being smaller and often perceived as riskier, rural SMEs can be just as innovative and successful as urban ones. Ensuring they can secure loans is vital for job creation and sustainable economic growth.'
The full study can be accessed here: ScienceDirect – Journal of Rural Studies
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