Table of Contents
Executive Summary
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- COVID-19 and commercial banking and finance
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- Figure 1: Expected impact of COVID-19 on commercial banking and finance, short, medium, and long term, 15 February 2021
- The market
- Commercial deposits significantly rise since the start of the pandemic
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- Figure 2: UK MFI sterling deposits from UK resident businesses, Q1 2019-Q4 2020*, (£m)
- Professional, scientific and technical activities lead industries in terms of NFB deposits
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- Figure 3: MFI sterling deposits of UK resident non-financial businesses, by industry type, largest six, December 2020, (£m)
- Net lending significantly rose in 2020 although large businesses repaid more than they had borrowed
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- Figure 4: UK MFI net loans to non-financial businesses,Q3 2019-Q4 2020, (£m, NSA)
- Deposit growth expected until 2023 when UK business emerges into the ‘next normal’
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- Figure 5: Forecast UK MFI sterling deposits from UK resident non-financial corporations, 2021-25, (£bn at 2020 prices, % annual change)
Issues and Insights
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- Open banking usage growing among small businesses
- Government urged to extend COVID support schemes but gaps in provision remain plus the loans are unlikely to be paid back in full
- SMEs are growing frustrated with traditional business banking services
- Businesses must now adapt to the new Brexit environment as transition period ends
The Market – Key Takeaways
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- Commercial deposits significantly rise since the start of the pandemic
- Deposit growth expected until 2023 when UK business emerges into the ‘next normal’
Commercial Banking Market
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- Commercial deposits rise significantly since the start of the pandemic
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- Figure 6: UK MFI sterling deposits from UK resident businesses, January 2019-December 2020, (£m)
- Professional, scientific and technical activities lead industries in terms of NFB deposits
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- Figure 7: MFI sterling deposits of UK resident non-financial businesses, by industry type, largest six, December 2020, (£m)
- SME loan applications and approvals rise significantly while 65% of loans head outside of London and the Southeast
- The 2020 BoE stress test cancelled due to the pandemic but solvency stress test will take place through 2021
Commercial Borrowing
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- Net lending significantly rose in 2020 driven by the COVID support schemes although larger businesses repaid more than they had borrowed
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- Figure 8: UK MFI net loans to non-financial businesses, by size of business, , Q4 2018-Q4 2020, (£m, not seasonally adjusted)
- Commercial lending rates fall in 2020
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- Figure 9: Average interest rate for UK MFI new advances to PNFCs, December in 2016-20, (% not seasonally adjusted)
- Credit availability and demand rise in Q4 2020
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- Figure 10: Availability of corporate credit to PNFCs in the past three months, by business size, Q4 2016-Q4 2020, (net percentage balance)
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- Figure 11: Demand for corporate credit by PNFCs in the past three months, by business size, Q4 2016-Q4 2020, (net percentage balance)
Commercial Banking Market Forecast
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- Short-, medium- and long-term impact on the industry
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- Figure 12: Expected impact of COVID-19 on commercial banking and finance, short, medium, and long term, 15 February 2021
- Market drivers and assumptions
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- Figure 13: Key drivers affecting Mintel’s market forecast (prepared on 15 February 2021), 2015-25, (in % annual change, annual average % rate, and £m)
- Learnings from the last recession
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- Figure 14: Industry performance following the last recession, 2008-15, (£m)
- Overview
- Deposits growth expected until 2023 when UK business emerges into the ‘next normal’
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- Figure 15: Forecast UK MFI sterling deposits from UK resident non-financial corporations, 2021-25, (£bn at 2020 prices, % annual change)
- Stricter Prompt Payment Code will usher in quicker payments era
The Impact of the Economy
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- UK economy contracts by record 9.9% in 2020 due to COVID-enforced economic shutdowns
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- Figure 16: Annual GDP growth rate, 2016-20*, (% annual change)
Market Trends
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- Online banking remains most commonly used method to carry out banking activities
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- Figure 17: Channel preference in small-business banking, by activity, July 2020, (% of respondents)
- Younger businesses most common users of mobile banking while older businesses most common users of online banking
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- Figure 18: Use of online and mobile banking services when carrying out business activities, by age of business, July 2020, (% of respondents)
- A slight fall in the number of current-account switches but vast opportunities remain
- Business confidence falls to almost decade-low level in Q4 2020 with many just hoping to survive the pandemic
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- Figure 19: Business Confidence Index, per half-year, Q2 2010-Q4 2020, (index figure)
- Write-offs on loans to PNFCs rise again in 2019 but likely to fall in 2020
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- Figure 20: Write-offs of loans to PNFCs from banks and building societies, 2015-20*, (£m, NSA)
- Almost half of SMEs have changed their business savings habits due to COVID-19
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
- Large corporates account for 48% of all private sector turnover
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- Figure 21: Business population in the UK, private sector, by company size, 2016-20, (number, £bn and millions employed)
- Private sector profitability falls while investment levels expected to remain robust
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- Figure 22: UK PNFCs’ average net rate of return, 2016-20*, (%)
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- Figure 23: UK total business investment, 2015-19, (chained volume measures and not seasonally adjusted, £bn and % annual change)
- Company insolvencies significantly fall in 2020, but a rise is expected after the removal of government support schemes
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- Figure 24: Company insolvencies in England and Wales, 2016-20, (number)
- M&A deals marginally fall in 2019, but remain high in comparison to pre-2018
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- Figure 25: Mergers and acquisitions of UK companies, 2015-19, (units)
- A third of small businesses’ finances are ‘tight’ or ‘struggling/in trouble’, with many expecting to have to borrow to survive
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- Figure 26: Current finance situation of the business, June 2018 vs June 2019 vs June 2020, (% of respondents)
Companies and Brands – Key Takeaways
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- Pandemic has curtailed challenger banks, but they remain poised to target gaps in services provided by the big banks
- Lloyds and Demica partner on supply-chain finance platform
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
- Pandemic has curtailed challenger banks but they remain poised to target gaps in services provided by the big banks
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- Figure 27: Market share for business bank accounts, July 2020, (%)
- Handelsbanken provides best overall service quality to SMEs while Barclays provides best online and mobile services
- The number of banks and building societies hits seven-year low in 2020
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- Figure 28: Number of banks and building societies operating in the UK, 2016-20, (number)
Competitive Strategies
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- HSBC sets out new branch network plan
- Revolut Business expands service by accepting online payments
- Neo launches multi-currency SME bank account
- Lloyds and Demica partner on supply-chain finance platform
- American Express and Amazon launch co-branded credit cards for UK SMEs
- Virgin Money launches free package to help businesses streamline their finances and partners with a fintech to boost its business banking credentials
Company Profiles
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- Aldermore Bank
- Recent company activity
- Financial information
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- Figure 29: Financial analysis of Aldermore Bank plc, 2015-20*, (£m)
- Barclays Bank PLC
- Recent company activity
- Financial information
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- Figure 30: Financial analysis of Barclays PLC, 2015-19, (£m)
- Co-operative Bank
- Recent company activity
- Financial information
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- Figure 31: Financial analysis of Co-operative Bank plc, 2015-19, (£m)
- HSBC Bank plc
- Recent company activity
- Financial information
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- Figure 32: Financial analysis of HSBC Bank, 2015-19, (£m)
- Lloyds Banking Group
- Recent company activity
- Financial information
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- Figure 33: Financial analysis of Lloyds Banking Group, 2015-19, (£m)
- NatWest Group plc (formerly known as RBS Group plc)
- Recent company activity
- Financial information
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- Figure 34: Financial analysis of NatWest Group (formerly known as Royal Bank of Scotland Group), 2015-19, (£m)
- Santander UK plc
- Recent company activity
- Financial information
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- Figure 35: Financial analysis of Santander UK plc, 2015-19, (£m)
- Virgin Money UK (formerly known as Clydesdale Bank plc)
- Recent company activity
- Financial information
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- Figure 36: Financial analysis of Virgin Money UK plc, 2018-20, (£m)
- Figure 37: Financial analysis of Clydesdale Bank plc, 2016-20, (£m)
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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