SMEs’ rising use of credit cards spells trouble for the UK economy
More and more small businesses are becoming reliant on credit cards, and it’s the whole economy that will suffer, writes Rob Burlison
Small businesses are the backbone of the UK economy, driving over half of private sector employment and fostering innovation and regional growth. Yet, these crucial economic growth engines are experiencing challenges. The 2025 Small Business Index Annual Report by Intuit Quickbooks, developed with Economist Professor Ufuk Akcigit, reveals important trends: small and medium-sized businesses (SMBs) are struggling to grow, create jobs and invest in the future. The major challenge? Restricted access to financing.
When small businesses face challenges, the effects can ripple through the economy – potentially influencing innovation, employment and overall recovery. Collaboration among key leaders within this space is essential to provide resources, share expertise and develop policies that help small businesses overcome obstacles and drive sustainable growth.
With UK employment declining for the second consecutive year, businesses are facing mounting challenges in securing credit – a key driver of employment growth. Despite these difficulties, progress is being made in certain areas. Sectors like construction and professional services added jobs, and Wales saw a modest increase of 400 jobs. We know that SMBs play an important role in the UK’s economic dynamism and strengthening financial health and growth through access to digital tools, working with trusted advisors and exploring alternative financing options will help business owners overcome these hurdles.
Credit card dependence: A costly trend
As traditional financial institutions scale back on long-term borrowing, many UK small businesses are turning to credit cards as a vital financing option due to their accessibility, flexibility and ability to meet immediate financial needs.
In 2024, 27 per cent of small businesses used credit cards to fund operations, with 33 per cent charging more than 25 per cent of their monthly expenses to their card. Although credit cards are accessible, their high interest rates drain resources, limiting investment in long-term growth.
This trend reflects a deeper issue: shrinking access to affordable traditional financing. Banks, navigating rising interest rates and stricter monetary policies, are becoming more selective with their long-term lending to small businesses. This shift leaves SMBs with fewer options, potentially leading to reliance on more expensive debt or postponement of important investments.
The role of the ‘income gap’
The report highlights the impact of financial institutions’ ‘income gap’ – a measure of how interest rates have affected their finances – on SMB performance. Banks with higher income gap scores provided more access to credit card financing, enabling businesses to hire and grow. Conversely, banks with lower income gap scores restricted financing, stifling SMB development. Addressing this disparity is key to supporting small businesses.
Small businesses are more than just economic contributors; they play a vital role in building local communities, creating jobs, and driving innovation and growth. Their success supports the nation as a whole, while their challenges impact economic resilience.
Encouraging the use of digital tools, working with trusted advisors, and exploring alternative financing options can help business owners overcome these hurdles. By working together, we can provide the support needed to help them thrive.
Steps to drive change
Solving these challenges requires targeted action by our SMB community. Here are my three top pieces of advice for SMBs:
- Develop a Comprehensive Financial Plan – Create a 12-month financial outlook to anticipate upcoming investments and expenses. This proactive approach can help you avoid last-minute purchases on credit cards, which often come with higher costs. Planning ahead ensures better financial management and allows you to explore more cost-effective funding options in advance.
- Embrace Digital Tools to Boost Efficiency – Streamline your operations by adopting digital tools. Digital businesses tend to be more efficient, allowing you to focus on value-added activities rather than getting bogged down in manual tasks. The report indicates that digital tools improve efficiency, reduce costs and mitigate errors. These are critical capabilities for smaller businesses operating in an unpredictable market.
- Seek Support from an Accountant – Engage with a qualified accountant to organise your financial documentation. Proper financial records not only help you manage your business effectively but also make you more attractive to lenders. Our research shows that SMBs who use the services of accounting or bookkeeping professionals are more successfully accessing finance, and achieving an 11.5 per cent increase in revenue compared with those that don’t.
Rob Burlison is director of international corporate affairs at Intuit Quickbooks