Table of Contents
Executive Summary
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- COVID-19 and Commercial Borrowing
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- Figure 1: Expected impact of COVID-19 on Commercial Borrowing, short, medium, and long-term, 6 January 2021
- The market
- Net lending remained positive in 2019 and is expected to reach pre-financial crisis levels in 2020
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- Figure 2: UK MFIs’ net loans to non-financial businesses, Q2 2019 – Q3 2020, (£ million, NSA)
- Outstanding loan amounts remain on an upward trend
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- Figure 3: UK total loan amounts outstanding to MFIs from non-financial businesses, May – October 2020, (£ million, not seasonally adjusted)
- Write-offs rise in 2019 but likely to fall in 2020
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- Figure 4: Write-offs of loans to PNFCs from banks and building societies, 2015-20*, (£ million, not seasonally adjusted)
- Gross lending expected to fall by an average of 3.4% between 2022 and 2025
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- Figure 5: Forecast UK MFIs’ gross lending to non-financial businesses, 2021-25, (£ million, not seasonally adjusted)
- The new Brexit environment brings both opportunity and uncertainty
Issues and Insights
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- Government-backed COVID support schemes have not reached all who need them and are unlikely to be paid back in full
- Open banking usage growing amongst small businesses
- Businesses must now adapt to the new Brexit environment as transition period ends
The Market – Key Takeaways
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- Net lending remained positive in 2019 and is expected to reach pre-financial crisis levels in 2020
- Outstanding loan amounts remain on an upward trend
- Gross lending expected to fall by an average of 3.4% between 2022 and 2025
Market Size
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- Net lending remained positive in 2019 and is expected to reach pre-financial crisis levels in 2020 driven by the COVID support schemes
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- Figure 6: UK MFIs’ net loans to non-financial businesses, Q3 2018 – Q3 2020, by size of business, (£ million, not seasonally adjusted)
- Outstanding loan amounts remain on an upward trend
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- Figure 7: UK total loan amounts outstanding to MFIs from non-financial businesses, November 2018 – October 2020, by size of business, (£ million, not seasonally adjusted)
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- Figure 8: M4 loan amounts outstanding from PNFCs, November 2018 – October 2020, (£ million, not seasonally adjusted)
Market Segmentation
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- Figure 9: UK total loan amounts outstanding to SMEs, October 2020, by industrial sector, (£ billion, not seasonally adjusted)
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- Figure 10: UK total loan amounts outstanding to large businesses, October 2020, by industrial sector, (£ billion, not seasonally adjusted)
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Further Segmentation
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- Alternative finance
- Peer-to-peer business lending
- RateSetter has lent the most in the P2P business sector in 2020 to date
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- Figure 11: Net new lending, by selected P2P lender, January-November 2020, (£ million)
- Bridging finance
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- Figure 12: UK bridging loans market value, in aggregated loan balances, 2016-20, (£ billion and % annual change)
- Commercial property (real estate) finance
- Total outstanding debt rises to seven-year high in 2019 and expected to rise further in 2020
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- Figure 13: Aggregated value of outstanding debt in loan books secured on UK commercial property, 2015-19, (£ billion)
- New lending fell by 11% in 2019 and is likely to decline in 2020
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- Figure 14: Gross value of annual loan originations, 2015-19, (£ billion)
- Banks increase share of new lending in 2019 but this is likely to have reversed in 2020
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- Figure 15: Gross value of loan originations, by allocation, 2018 and 2019, (% of total)
- SME finance
- SME funding gap
- Working capital and cash flow needs remain as the key reasons for SMEs requiring funds
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- Figure 16: SME lending, by reason, 2019, (%)
- Value of SME loan balances fall to six-year low in 2019, but is expected to have rebounded in 2020
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- Figure 17: Value of SME loans outstanding, by region, 2016-20*, (£ million)
Market Forecast
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- Short-, medium- and long-term impact on the industry
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- Figure 18: Expected impact of COVID-19 on Commercial Borrowing, short-, medium-, and long-term, 6 January 2021
- Initial lockdown
- Re-emergence
- Recovery
- Market drivers and assumptions
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- Figure 19: Key drivers affecting Mintel’s market forecast, 2015-2025, (in % annual change, annual average % rate, and £ million) – (prepared on 15 December 2020)
- Learnings from the last recession
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- Figure 20: Industry performance following the last recession, 2012-2016, (£ million)
- Pandemic will drive the need for ever-flexible lending options, especially for smaller businesses
- Gross lending expected to fall by an average of 3.4% between 2022 and 2025
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- Figure 21: Forecast UK MFIs’ gross lending to non-financial businesses, 2020-24, (£ million, not seasonally Adjusted)
- Loan write-offs anticipated to decline until 2023 before rising
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- Figure 22: Write-offs of loans to PNFCs from banks and building societies, 2021-25, (£ million, not seasonally adjusted)
The Impact of the Economy
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- Annual GDP growth falls to decade low in 2019 and is expected to decline in 2020 due to COVID-driven economic shutdown
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- Figure 23: Annual GDP growth rate, 2016 – 2020*, (annual % Change)
- Bank rate set at a record low of 0.1%
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- Figure 24: Bank Rate, 2008-2020, by date of adjustment, (%)
Market Trends
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- Business confidence recovers from decade-low in Q4 2019 but remains in negative territory
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- Figure 25: Business confidence index, per half-year, Q2 2010 – Q4 2020, (index figure)
- Write-offs on loans to NFCs rise again in 2019 but likely to fall in 2020
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- Figure 26: Write offs of loans to PNFCs from banks and building societies, 2015-20*, (£ million, not seasonally adjusted)
- Credit availability and demand significantly rise in Q2 2020 but have fallen in Q3
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- Figure 27: Availability of corporate credit to PNFCs in the last three months, Q4 2014 – Q3 2020, by business size, (net percentage balance)
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- Figure 28: Demand for corporate credit by PNFCs in the last three months, Q4 2014 – Q3 2020, by business size, (net percentage balance)
- Commercial lending rates fall in 2020
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- Figure 29: Average interest rate for UK MFI new advances to PNFCs, at October in 2016-2020, (% not seasonally adjusted)
Market Drivers
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- Brexit is complete and companies must now adapt to the new operating environment despite a trade deal having been agreed
- Company insolvencies stall in 2020 as government’s COVID support measures keep ‘in-danger’ businesses afloat
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- Figure 30: Company insolvencies in England and Wales, 2015-19, (number)
- Commercial property transactions fall in 2019 and expected to decline in 2020
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- Figure 31: Number of non-residential property transactions, 2015-19, (number, seasonally adjusted)
- Both business investment levels and private sector profitability fall
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- Figure 32: UK PNFCs average annual net rate of return, 2015 – 2019, (% return)
- Figure 33: UK total business investment, 2015-19, (chained volume measures and not seasonally-adjusted, £ billion)
- Inward M&A deals marginally rise but domestic M&A deals fall in 2019
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- Figure 34: Mergers and acquisitions of UK companies, 2015-19, (number of companies)
- Government schemes
- The COVID-19 business support schemes (see Industry response to COVID-19 for scheme descriptions)
- British Business Bank
- Business Finance Support Finder
- Enterprise Finance Guarantee
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- Figure 35: EFG lending, by number and value of loans offered and by number and value of loans drawn, 2009-2019, (units and £ million)
- BoE Stress Test
Companies and Brands – Key Takeaways
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- New service launched to help streamline lending data analysis
- Mainstream banks announce further partnerships with fintechs
Industry Structure
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- Industry response to COVID-19
- The COVID-19 response
- Support for SMEs
- Coronavirus Business Interruption Loan Scheme
- Bounce Back Loan Scheme
- Future Fund Scheme
- Support for corporates
- Industry development
- Metro Bank partners with ezbob to deliver small business loans platform
- New service launched to help streamline lending data analysis
- Think Business Loans launches SME credit score app
Competitive Strategies
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- Mainstream banks announce further partnerships with fintechs
- New P2P lending credit card launched by Elfin Market
- HSBC UK and first direct introduce Apple Business Chat
Company Profiles
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- Barclays Bank PLC
- Recent company activity
- Financial information
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- Figure 36: Financial analysis of Barclays Bank PLC, 2015-19, (£ million)
- Funding Circle
- Recent company activity
- Financial information
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- Figure 37: Financial analysis of Funding Circle, 2015-19, (£ million)
- HSBC Bank plc
- Recent company activity
- Financial information
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- Figure 38: Financial analysis of HSBC Bank, 2015-19, (£ million)
- Lloyds Banking Group
- Recent company activity
- Financial information
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- Figure 39: Financial analysis of Lloyds Banking Group, 2015-19, (£ million)
- NatWest Group plc (formerly known as RBS Group plc)
- Recent company activity
- Financial information
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- Figure 40: Financial analysis of NatWest Group (formerly RBS Group), 2015-19, (£ million)
- Santander UK plc
- Recent company activity
- Financial information
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- Figure 41: Financial analysis of Santander UK plc, 2015-19, (£ million)
- Shawbrook Bank
- Recent company activity
- Financial Information
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- Figure 42: Financial analysis of Shawbrook Bank, 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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