Table of Contents
Executive Summary
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- The market
- Commercial deposits remain on upward trend
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- Figure 1: UK MFIs sterling deposits from UK resident businesses, Q2 2018-Q3 2019, (£ million outstanding of deposit liabilities, excluding under repo, not seasonally adjusted)
- Professional, scientific and technical activities lead industry in terms of NFB deposits
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- Figure 2: MFI sterling deposits of UK resident non-financial businesses, by industry type, largest Six, November 2019, £ million)
- Net lending remained positive in 2018 and most likely in 2019 as well
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- Figure 3: UK MFIs’ net loans to non-financial businesses, Q2 2018-Q3 2019, (£ million, not seasonally adjusted)
- Deposits growth expected as the UK enters the Brexit transition period and beyond
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- Figure 4: Forecast UK MFIs sterling deposits from UK resident non-financial corporations, 2020-24, (£ billion at 2019 prices, % annual change)
- What we think
Issues and Insights
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- Mainstream banks still finding it hard to adapt and implement new technology which could affect their, and their customers’, performance
- The facts
- The implications
- Increasing financial support to SMEs disrupted by market exits
- The facts
- The implications
The Market – What You Need to Know
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- Commercial deposits remain on upward trend
- Deposits growth expected as the UK enters the Brexit transition period and beyond
Commercial Banking Market
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- Commercial deposits remain on upward trend
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- Figure 5: UK MFIs sterling deposits from UK resident businesses, December 2017- November 2019, (£ million outstanding of deposit liabilities, excluding under repo, not seasonally adjusted)
- Professional, scientific and technical activities lead industries in terms of NFB deposits
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- Figure 6: MFI sterling deposits of UK resident non-financial businesses, by industry type, largest Six, November 2019, £ million)
- SME loan applications fall while two thirds of loans head to outside of London and the South-East
- Lenders pass the BoE’s 2019 stress test although changes are forthcoming
Commercial Borrowing
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- Net lending remained positive in 2018 and is expected to have been positive in 2019
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- Figure 7: UK MFIs’ net loans to non-financial businesses, Q3 2017-Q3 2019, by size of business, (£ million, not seasonally adjusted)
- Commercial lending rates stabilise since 2018 following a rise over 2017
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- Figure 8: Average interest rate for UK MFI new advances to PNFCs, at November in 2015-19, (% not seasonally adjusted)
- Credit availability and demand falls in 2019
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- Figure 9: Availability of corporate credit to PNFCs in the past three months, Q4 2015-Q4 2019, by business size, (net percentage balance)
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- Figure 10: Demand for corporate credit by PNFCs in the past three months, Q4 2015-Q4 2019, by business size, (net percentage balance)
Commercial Banking Market Forecast
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- Deposits growth expected as the UK enters the Brexit transition period and beyond
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- Figure 11: Forecast UK MFIs sterling deposits from UK resident non-financial corporations, 2020-24, (£ billion at 2019 prices, % annual change)
- Technology-drive leading towards a new ‘Open X’ era
- Business banking resolution scheme aims to transform dispute process
The Impact of the Economy
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- Annual GDP growth falls to six-year low in 2018 and continues to fall in 2019
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- Figure 12: Annual GDP growth rate, 2015 -19*, (% annual change)
Market Trends
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- Online banking most commonly used to carry out banking activities
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- Figure 13: Channels used to carry out various business banking activities, June 2019, (% of respondents)
- Younger businesses most likely to use mobile banking with supplier payments most common activity
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- Figure 14: Use of mobile banking services when carrying out business activities, by age of business, June 2019, (% of respondents)
- Rise in the number switching accounts but opportunities remain vast
- Business confidence at a decade-low in Q4 2019 with many continuing to delay financing plans
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- Figure 15: Business confidence index, per half-year, Q2 2009-Q4 2019, (index figure)
- Write-offs on loans to PNFCs rise for first time in four years in 2018 but likely to have fallen in 2019
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- Figure 16: Write offs of loans to PNFCs from banks and building societies, 2014-19*, (£ million, not seasonally adjusted)
Market Drivers
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- UK leaves the EU with a transition period concluding in December 2020 but the threat of ‘no-deal’ remains and continues to fuel uncertainty
- Large corporates account for almost half of all private sector turnover
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- Figure 17: Business population in the UK, private sector, by company size, 2015-19, (number, £ billion and millions employed)
- Both business investment levels and private sector profitability fall
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- Figure 18: UK PNFCs’ average net rate of return, 2015-19*, (% return)
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- Figure 19: UK total business investment, 2014-18, (chained volume measures and not seasonally-adjusted, £ billion and % annual change)
- Company insolvencies marginally fall in 2019, but difficult environment likely to cause further casualties going forward
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- Figure 20: Company insolvencies in England and Wales, 2015-19, (number)
- Inward and domestic M&A deals rose significantly in 2018 as the relatively low pound and exit from the EU drove investor activity
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- Figure 21: Mergers and acquisitions of UK companies, 2014-18, (units)
- Although 86% of small businesses’ finances are ‘healthy’ or ‘OK’, a fifth have missed out on business opportunities due to a lack of funding
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- Figure 22: Current finance situation of the business, June 2017 vs June 2018 vs June 2019, (% of respondents)
Companies and Brands – What You Need to Know
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- Challenger banks continue expansion but traditional banks still dominate market share
- Lloyds, NatWest and Barclays combine to open business banking hubs
Industry Structure
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- Industry development
- Challenger banks continue expansion, but traditional banks still dominate market share
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- Figure 23: Market share for business bank accounts, June 2019, (%)
- Handelsbanken provides best overall service quality to SMEs while Barclays provides best online and mobile services
- The number of banks and building societies hit five-year low in 2019
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- Figure 24: Number of banks and building societies operating in the UK, 2015-19
Competitive Strategies
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- Lloyds, NatWest and Barclays combine to open business banking hubs
- Revolut targets business banking growth as it launches expenses management tool
- Lloyds Bank Commercial teams up with Optal to offer streamlined payments
- HSBC launches Treasury APIs for payments in 27 markets
Company Profiles
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- Aldermore Bank
- Recent company activity
- Financial information
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- Figure 25: Financial analysis of Aldermore Bank plc, 2014-19*, (£ million)
- Barclays plc
- Recent company activity
- Financial information
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- Figure 26: Financial analysis of Barclays plc, 2014-18, (£ million)
- Co-operative Bank
- Recent company activity
- Financial information
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- Figure 27: Financial analysis of Co-operative Bank plc, 2014-18, (£ million)
- HSBC Bank plc
- Recent company activity
- Financial information
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- Figure 28: Financial analysis of HSBC Bank, 2014-18, (£ million)
- Lloyds Banking Group
- Recent company activity
- Financial information
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- Figure 29: Financial analysis of Lloyds Banking group, 2014-18, (£ million)
- RBS Group
- Recent company activity
- Financial information
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- Figure 30: Financial analysis of RBS Group, 2014-18, (£ million)
- Santander UK plc
- Recent company activity
- Financial information
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- Figure 31: Financial analysis of Santander UK plc, 2014-18, (£ million)
- Virgin Money UK (formerly known as Clydesdale Bank plc)
- Recent company activity
- Financial information
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- Figure 32: Financial analysis of Clydesdale Bank plc, 2015-19, (£ million)
Appendix - Data Sources, Abbreviations and Supporting Information
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- Abbreviations
- Methodology
Further Sources and Contacts
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- Trade Associations
- Trade Magazines
- Trade Exhibitions
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