Table of Contents
Executive Summary
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- The market
- COVID-19 to drive sharp decline in originations, with speedy recovery dependent on the limitation of defaults
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- Figure 1: Gross value of annual loan originations, 2016-20 (£ billion)
- Figure 2: Aggregated value of outstanding debt on loan books secured on UK commercial property, 2016-20 (£ billion)
- Future outlook and the impact of COVID-19
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- Figure 3: Expected impact of COVID-19 on commercial mortgages, short, medium and long term, 14 July 2020
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- Figure 4: Forecast value of annual loan originations, 2021-25 (£ billion)
- UK banks raise market share but only due to withdrawal of international investment
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- Figure 5: Gross value of loan originations, by allocation, 2018 and 2019 (% of total lending)
- Poor economic performance and declining confidence responsible for 2019 decline in originations
- Pressure on retailers is encouraging redevelopment into mixed-use properties
- Companies and brands
- Small bank closures driven by adoption of digital banking
- Finance providers lead the economic response to the pandemic, backed by government schemes
- What we think
The Impact of COVID-19 on Commercial Mortgages
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- The market
- COVID-19 to drive sharp decline in originations, with speedy recovery dependent on the limitation of defaults
- Limits to state support mean lenders must fill the gap
- Shifts in consumer behaviour may deepen the risk of SME defaults in the retail sector
- Office sector occupancy likely to fall as businesses react to rise in homeworking
- Companies and brands
- Finance providers lead the economic response to the pandemic, backed by government schemes
- COVID-19: Market context
Issues and Insights
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- COVID-19 further discourages international investment activity
- The facts
- The implications
- Bank branch closures open spaces for specialised lending
- The facts
- The implications
The Market – What You Need to Know
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- Originations to fall in 2020 in response to rise in defaults and extreme uncertainty
- COVID-19 anticipated to curtail new lending until recovery is cemented
- Retail faces challenge of redevelopment during COVID-19 pandemic
Market Size
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- Methodology
- Growing retail defaults drive down new loan originations for 2019
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- Figure 6: Gross value of annual loan originations, 2016-20 (£ billion)
- Rising debt and falling originations suggest growing lender caution
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- Figure 7: Aggregated value of outstanding debt on loan books secured on UK commercial property, 2016-20 (£ billion)
Category Market Share
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- International lenders retreat as uncertainty grows over Brexit
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- Figure 8: Gross value of loan originations, by allocation, 2018 and 2019 (% of total lending)
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- Figure 9: Change in gross value of loan originations, by allocation, 2018-19 (% annual change)
- Retail sector loan margins up to reflect risk premium
Market Forecast
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- Increased retail vacancies to reduce property prices
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- Figure 10: Expected impact of COVID-19 on commercial mortgages, short, medium and long term, 8 July 2020
- Figure 11: Forecast value of annual loan originations, 2021-25 (£ billion)
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- Figure 12: Forecast value of outstanding debt on loan books secured on UK commercial property, 2021-25 (£ billion)
Market Trends
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- Retail repurposing may drive an uptick in development funding
- Bank closures reflect maturity of digital platforms but could harm rural lending
- Office sector occupancy may fall as businesses react to empty offices
Market Drivers
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- Brexit headwind discourages investment required to address long-term rise in labour costs
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- Figure 13: UK quarterly business investment excluding exceptional transfers, Q1 2015-Q1 2020 (£ million)
- Figure 14: UK Business Confidence Index, Q3 2013-Q4 2019
- Shifts in consumer behaviour may deepen the risk of SME defaults in the retail sector
- Limits to state support mean lenders must fill the gap
Companies and Brands – What You Need to Know
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- Consumer adoption of digital banking is driving small bank closures
- The COVID-19 response
Industry Response
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- The COVID-19 response
- Support for SMEs
- Coronavirus Business Interruption Loan Scheme
- Bounce Back Loan Scheme
- Future Fund Scheme
- Support for corporates
Industry Structure
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- Changes in industry structure
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- Figure 15: Changes in the industry structure of bank and building society activities, 2015-19 (number of businesses and outlets)
- Figure 16: Changes in the industry structure of financial leasing activities, 2015-19 (number of businesses and outlets)
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- Figure 17: Changes in the industry structure of other credit-granting activities, 2015-19 (number of businesses and outlets)
- Structure by employment
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- Figure 18: Changes in the employment structure of bank and building society activities, by employment band, 2018 and 2019 (number of outlets)
- Figure 19: Changes in the employment structure of financial leasing activities, by employment band, 2018 and 2019 (number of outlets)
- Figure 20: Changes in the employment structure of other credit-granting activities, by employment band, 2018 and 2019 (number of outlets)
- Structure by turnover
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- Figure 21: Changes in the turnover structure of bank and building society activities, by turnover band, 2018 and 2019 (number of businesses)
- Figure 22: Changes in the turnover structure of financial leasing activities, by turnover band, 2018 and 2019 (number of businesses)
- Figure 23: Changes in the turnover structure of other credit-granting activities, by turnover band, 2018 and 2019 (number of businesses)
Company Profiles
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- Barclays Bank
- Recent company activity
- Financial information
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- Figure 24: Financial analysis of Barclays Plc, 2015-19
- HSBC Bank
- Recent company activity
- Financial information
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- Figure 25: Financial analysis of HSBC Bank Plc, 2015-19
- Lloyds Banking Group
- Recent company activity
- Financial information
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- Figure 26: Financial analysis of Lloyds Banking Group Plc, 2015-19
- Royal Bank of Scotland Group
- Recent company activity
- Financial information
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- Figure 27: Financial analysis of Royal Bank of Scotland Group Plc, 2015-19
- Santander UK
- Recent company activity
- Financial information
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- Figure 28: Financial analysis of Santander UK Plc, 2015-19
Appendix – Data Sources, Abbreviations and Supporting Information
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- Abbreviations
- Methodology
Further Sources and Contacts
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- Trade associations
- Association of Short Term Lenders
- CoStar
- The Institute of Chartered Accountants in England and Wales
- National Association of Commercial Finance Brokers
- RICS
- Trade magazines
- Bridging & Commercial
- Business Matters
- Commercial Reporter
- Loans Insider
- Mortgage Finance Gazette
- Trade events
- Financial Services Expo London 2020/21
- NACFB Commercial Finance Expo 2021
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