Independent lenders are reshaping the UK finance market

The Finance & Leasing Association (FLA) held its first annual market briefing on March 5th, bringing together its full-year 2025 market data alongside an economic outlook and a panel of senior industry voices. It was a significant moment for the trade body — and for a sector that, as FLA director Shanika Amarasekara opened by saying, deserves more recognition than it typically receives.

“Consumer finance, motor finance, and asset finance sit at the heart of the economy, not on the sidelines. Every day, the members that the FLA represents enable businesses to invest in equipment, vehicles, and technology that they need to grow. They help households spread the cost of major investments, and help communities across the UK continue to prosper.”

The data that followed made the case. FLA members provided almost £163 billion of new finance in 2025 — 5% higher than 2024, the fifth consecutive year of growth, and the strongest growth rate since 2022. But within those headline numbers there were structural shifts that deserve close attention. None more so than the continued rise of independent lending.

The independent lending story

Independent lenders now provide 30% of all asset finance new business in the UK. In 2007, that figure was 16%. The near-doubling of their market share over eighteen years is one of the most significant structural shifts in the UK lending market — and it continued in 2025, with non-bank asset finance growing a further 4% to reach £12 billion.

The SME dimension is striking. FLA members provided a record £24.4 billion of asset finance to SMEs in 2025, up 4% on the previous year, representing 64% of all asset finance new business. The growth in that SME total is being driven disproportionately by independent lenders. Broker-introduced and sales finance now account for more than half of all new asset finance business — a channel mix that would have been unrecognisable before the financial crisis. Independent lenders’ ability to move quickly, price accurately, and serve market segments that larger institutions find difficult to reach efficiently is increasingly what keeps SME investment flowing.

The headline numbers

Asset finance reached a record £40.3 billion, financing more than a third of all UK business investment in machinery, equipment, and vehicles. Outstanding balances across the asset finance book reached a new high of £77.4 billion. Arrears held stable at 0.7% — the same figure as at the end of 2024 — reflecting both disciplined underwriting and the underlying resilience of business borrowers who have managed through Brexit, COVID, and the energy price shock in close succession.

The consumer finance market grew 6% overall, with total outstanding balances reaching £139.8 billion — 56% of all consumer credit outstanding in the UK. The second charge mortgage market was the standout performer, growing 24% to £2.1 billion and recording its highest volume of new agreements since 2008.

Asset finance: what grew and what didn’t

Within the £40.3 billion asset finance total, performance varied across asset classes, and some of the detail tells an interesting story about where the UK economy is investing — and where it isn’t.

• New car finance reached £11.4 billion, up 1% on 2024. The market overall passed 2 million new car registrations for the first time since 2019, though growth was heavily concentrated in fleet channels rather than retail demand, with a significant volume of manufacturer push activity in the final quarter as producers worked to meet ZEV mandate targets.
• Used car finance grew 3% to £10.8 billion — a stronger performance than new, consistent with the used market’s faster recovery from supply disruption and its growing EV component.
• Plant and machinery finance returned to growth after two years of modest decline, up 3% to £7.8 billion. Construction plant continued its post-COVID recovery, agricultural finance grew for the fifth consecutive year, and production process plant returned to growth after a two-year fall.
• Commercial vehicle finance fell 3%, mirroring SMMT registration data for new light commercial vehicles. Used CVs performed considerably better — up 5% for light and 11% for heavy — suggesting fleet operators are extending vehicle life rather than committing to new investment.
• IT and business equipment finance remains the most notable laggard. Despite growing 4% in 2025, IT finance at £1.3 billion and business equipment at £1.8 billion are both still significantly below pre-pandemic levels. This may reflect weak underlying investment, but is more likely in part a structural shift towards subscription and as-a-service financing models that sit outside traditional asset finance. It is a question worth tracking.

Electric vehicles: momentum, but mandates missed

Electric vehicle financing is becoming a mainstream component of the market rather than a niche within it. The 2025 data shows genuine progress on several fronts.

In consumer new car finance, EV share rose from 12% in 2024 to 17% in 2025, with members financing over 113,000 battery electric cars — a 56% increase on the previous year. Hybrid and plug-in hybrid finance also grew strongly, up 13% and 12% respectively.

In the used car market, the EV story is arguably more interesting. Financed EVs now represent 7% of all used car finance transactions, up from just 3% in 2023. Members financed almost 102,000 used battery electric cars in 2025, up 44% on the previous year. Three-to-five year old EVs have become among the fastest-selling vehicles on the used market, averaging 24 to 28 days to sell. This is a market that barely existed three years ago.

The ZEV mandate was not met in 2025 — 72% of all EV sales came through fleet channels, with retail demand still short of what the targets require. SMMT forecasts suggest the mandates for 2026 and 2027 will also fall short. The barrier most consistently cited is price: the gap between equivalent ICE and EV vehicles has narrowed from over 50% to around 17%, but converting total cost of ownership into a straightforward monthly payment conversation at point of sale remains genuinely difficult.

Residual value risk is unevenly distributed. Vehicles aged three years and above are performing well — prices stable, days to sell strong. The zero-to-three year cohort faces more pressure, partly from tactical manufacturer registrations creating short-cycle supply. Funders with exposure in that segment have been watching closely.

Consumer finance: a strong year with one exception

The consumer finance market grew 6% in 2025, with one clear exception. Retail store and online credit fell 4% to £9.1 billion — the most visible sign yet that buy now pay later is taking share from more traditional point-of-sale credit products.

Point-of-sale finance outside motor grew 8% to £47.1 billion. Within that, non-car point-of-sale finance grew 19% to £468 million — a smaller market, but an indicator of the green home improvement and solar financing opportunity that several lenders are actively building into.

Personal loans and credit cards combined grew 5% to £64 billion.

The second charge mortgage market’s 24% growth to £2.1 billion was the headline consumer finance number. At 41,760 new agreements it reached a level not seen since 2008, driven by households using home equity to manage cost-of-living pressures and consolidate more expensive unsecured debt.

The economic backdrop: subdued, with a new risk

UK GDP grew 1.3% in 2025, but the composition matters more than the headline. Growth was heavily front-loaded — 4.7% in Q1, slowing to just 0.1% by Q3 as budget uncertainty and the cyber breach at JLR took effect. The OBR’s forecast for 2026 was around 1.1% growth, but those forecasts predate the Middle East conflict escalation and its impact on energy prices.

At the time of the briefing, spot oil prices were running approximately 20% above OBR forecasts and spot gas prices around 25% above. Since gas-fired power stations often set the marginal price of electricity in the UK, energy price inflation compounds through the system. The direct household impact via the energy price cap is not expected to be felt until July, and only if current price levels are sustained. For lenders, the secondary effect on consumer confidence and disposable income is the more immediate concern.

Two Bank Rate cuts are expected in 2026, bringing the rate to approximately 3.25% by year end, though the energy situation may push those back. Consumer confidence remains negative, retail spending fell in Q4 2025, and the household saving ratio reflects ongoing caution rather than renewed confidence.

SME borrowing reached its highest growth rate since mid-2021 at 2.4%, but barriers to SME financing remain — cost, regulatory uncertainty, and lender risk appetite all cited. The most credible development work on SME credit is technology-enabled: AI integrated directly into borrower systems to improve information quality and allow more accurate pricing. It is promising, but early-stage.

The political context in brief

The FLA briefing’s political session — presented by strategist Scarlett Maguire — provided context that is hard to ignore for any business in consumer and SME finance.

Public trust in institutions, big business, and profit-making has deteriorated significantly since the pandemic. The electorate is more fragmented, more economically pessimistic, and more favourable to government intervention than at any point in recent memory. Reform and the Greens now exercise significant political pressure despite their modest parliamentary representation — and both voter blocs share a deep scepticism of profitable business.

The consistent message from the industry panel in response was that collaboration and proactive engagement matter more than they did. The FLA’s model of bringing the industry’s voice together — rather than individual firms lobbying in isolation — was cited several times as increasingly important. The story of what independent lenders have done for SME investment in the UK is precisely the kind of story the industry needs to be telling more loudly, and to a wider audience than just the government of the day.