Table of Contents
Executive Summary
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- Market size
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- Figure 1: UK MFIs’ net loans to non-financial businesses, by size of business, Q4 2013-Q3 2015
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- Figure 2: UK MFIs’ gross lending to and repayments made by non-financial businesses, by industrial sector, 2015 to May
- Market trends
- Market factors
- Continued struggles by mainstream lenders to provide finance to SMEs and legislative changes have peaked alternative lenders’ interest
- Commercial property transactions on the rise
- Profitability and business investment rising in the private sector
- Reports of positive business confidence at odds with decline in M&A activity
- Industry structure
- Forecast
- Gross lending expected to gradually improve to 2020
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- Figure 3: Forecast UK MFIs’ net loans to non-financial businesses, 2016-20
- Alternative market expected to more than double its lending over the next five years
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- Figure 4: Forecast UK alternative lending market, by funding type, 2016-20
- Rising number of transactions to drive new commercial mortgage lending
- What we think
Key Insights
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- Can alternate lenders become a substantial market player?
- Have bank lending conditions improved or are companies still in the process of refinancing?
- Will real estate borrowing continue to dominate the industry?
UK Economy
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- Key points
- Overview
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- Figure 5: UK GDP, 2004-15
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- Figure 6: Quarters after GDP peak, 1979, 1990 and 2008
- Inflation
- Interest rates
- House prices
- Consumer spending
- Manufacturing
- Business investment
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- Figure 7: UK GFCF 2003-15
- Imports
- Exports
Market Factors
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- Key points
- Output growth slows in the first half of 2015
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- Figure 8: GDP growth rate, 2012-15
- Figure 9: GDP growth rate graph, 2012-15
- Continued struggles by mainstream lenders to provide finance to SMEs and legislative changes have peaked alternative lenders’ interest
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- Figure 10: Company insolvencies in England and Wales, 2010-14
- Commercial property transactions on the rise
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- Figure 11: Number of non-residential property transactions, 2010-14
- Figure 12: Number of non-residential property transactions graph, 2010-14
- Profitability and business investment rising in the private sector
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- Figure 13: UK PNFCs net rate of return, Q1 2010-Q2 2015
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- Figure 14: UK PNFCs net rate of return, Q1 2010-Q2 2015
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- Figure 15: UK total business investment, 2010-15
- Figure 16: UK total business investment graph, 2010-15
- Reports of positive business confidence at odds with decline in M&A activity
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- Figure 17: Mergers and acquisitions of UK companies, 2010-15*
- Government schemes
- British Business Bank
- Business Finance Support Finder
- Enterprise Finance Guarantee
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- Figure 18: EFG lending, by number and value of loans offered and drawn, 2009-15*
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- Figure 19: EFG lending, by number of loans offered and drawn, 2009-14
- Figure 20: EFG lending, by value of loans offered and drawn, 2009-14
- Asset Purchase Facility
- Project Merlin
- The National Loan Guarantee Scheme
- Funding for Lending Scheme
Market Size
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- Key points
- Net lending showing signs of recovery in 2015
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- Figure 21: UK MFIs’ net loans to non-financial businesses, by size of business, Q4 2013-Q3 2015
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- Figure 22: UK MFIs’ net loans to non-financial businesses, by size of business, Q4 2013-Q3 2015
- Outstanding loan amounts on the decline
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- Figure 23: UK total loan amounts outstanding to MFIs from non-financial businesses, by size of business, October 2013-September 2015
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- Figure 24: M4 loan amounts outstanding from PNFCs, October 2013-September 2015
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- Figure 25: M4 loan amounts outstanding from PNFCs graph, October 2013-September 2015
- Market segmentation
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- Figure 26: UK MFIs’ gross lending to and repayments made by non-financial businesses, by industrial sector, 2013 H1-May 2015
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- Figure 27: UK MFIs’ gross lending to and repayments made by non-financial businesses, by industrial sector, 2015 to May
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- Figure 28: Net finance raised by UK businesses, by industrial sector, 2013 and 2014
- Further segmentation
- Alternative finance
- Peer-to-peer lending and crowdfunding
- Funding Circle dominates P2P business lending market
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- Figure 29: P2P business lending volume and market share, by lender, 2015*
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- Figure 30: P2P business lending volume, by lender, 2015*
- Manufacturing industries and professional services apply for most P2P business loans
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- Figure 31: P2P business borrowers, by industrial sector
- Crowdcube leads crowdfunding market, albeit with only three major competitors
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- Figure 32: Crowdfunding volume and market share, by lender, 2015*
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- Figure 33: Crowdfunding lending volume, by lender, 2015*
- Bridging finance
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- Figure 34: UK bridging loans market value, in aggregated loan balances, 2011-15
- Commercial property (Real Estate) finance
- Smaller providers enjoying success
- Impact of financial crisis still being felt in the sector
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- Figure 35: Aggregated value of outstanding debt in loan books secured on UK commercial property, 2011-15
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- Figure 36: Aggregated volume of outstanding debt in loan book secured on UK commercial property graph, 2011-15
- Loan originations are on the rise, signalling the start of a possible recovery
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- Figure 37: Gross value of annual loan originations, 2011-15
- UK banks and building societies hold largest share of loans
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- Figure 38: Value of outstanding loan books secured on uk commercial property, by type of lender, 2014
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- Figure 39: Value of outstanding loan books secured on UK commercial property graph, by type of lender
- Offices and retail property still dominate the share of loans allocated, but the industrial and hotel sectors are strengthening their market share
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- Figure 40: Allocation of outstanding loans to investment and owner-occupied property, by type of use, 2014
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- Figure 41: Allocation of outstanding loans to investment and owner-occupied property graph, by type of use, 2014
- Non-bank lenders taking an increasing proportion of new loans
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- Figure 42: Gross value of loan originations, by allocation, 2014
- Loan-to-value ratios rise as investors are seeking riskier, higher returns
- SME finance
- SME funding gap
- Alternative finance offering a new lending route for SMEs
- London and the South East account for a third of SME lending in Britain
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- Figure 43: SME turnover and lending, by region, September 2014
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- Figure 44: SME lending, by region, September 2014
- SMEs most in need of finance for cash flow and capital equipment
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- Figure 45: SME lending, by reason, July-October 2014
- Value of SME loan balances have fluctuated over the last three years
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- Figure 46: Value of SME loan balances, by region, 2012-15*
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- Figure 47: Value of SME loan balances graph, by region, 2012-14
Market Trends
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- Key points
- Business confidence has remained positive since 2012 and has influenced borrowing demand
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- Figure 48: Business confidence index, per half-year, 2005-15
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- Figure 49: Business confidence index, per half-year graph, 2005-15
- Write offs on loans to non-financial companies have fallen since 2011
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- Figure 50: Write offs of Loans to PNFCs from banks and building societies, 2010-15
- Demand for credit from large corporates rising
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- Figure 51: Availability of corporate credit to PNFCs in the last three months, by business size, Q1 2010-Q3 2015
- Figure 52: Availability of corporate credit to PNFCs in the last three months graph, by business size, Q1 2010-Q3 2015
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- Figure 53: Demand for corporate credit by PNFCs in the last three months, by business size. Q1 2010-Q3 2015
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- Figure 54: Demand for corporate credit to PNFCs in the last three months graph, by business size, Q1 2010-Q3 2015
- Rates remain low for commercial lending
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- Figure 55: Average interest rate for UK MFI new advances to PNFCs, at September in 2011-15
- The Funding for Lending scheme is now focused on small business finance
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- Figure 56: Net loans to UK SMEs from FLS participants, 2014-15
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- Figure 57: Net loans to UK SMEs from FLS participants graph, 2014-15
Industry Structure
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- Key points
- Challenger banks on the rise, but still can’t compete with the existing major groups
- Alternative finance lenders are making a mark on the industry
- The number of banks and building societies has remained largely unchanged since 2013
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- Figure 58: Number of banks and building societies operating in the UK, 2013-15
- Figure 59: Number of banks and building societies operating in the UK, 2015
- Government scaling back its involvement in the banking sector
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- Figure 60: Cost to UK government of financial interventions in banking sector, July 2015
- SME lending a key growth target area for mainstream lenders
- HSBC
- Barclays
- Lloyds Banking Group
- RBS Group
Company Profiles
Aldermore Bank
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- Figure 61: Financial analysis of Aldermore Bank plc, 2010-14
- Company outlook
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Barclays Plc
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- Figure 62: Financial analysis of Barclays plc, 2010-14
- Company outlook
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Clydesdale Bank plc
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- Figure 63: Financial analysis of Clydesdale Bank plc, 2010-14
- Company outlook
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Funding Circle
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- Figure 64: Financial analysis of Funding Circle, 2010-14
- Company outlook
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GE Capital UK
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- Figure 65: Financial analysis of GE Capital Bank Limited, 2010-14
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- Figure 66: Financial analysis of GE Capital Invoice Finance Limited, 2009-12
- Company Outlook
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HSBC Bank plc
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- Figure 67: Financial analysis of HSBC Bank, 2010-14
- Company outlook
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Lloyds Banking Group
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- Figure 68: Financial analysis of Lloyds Banking Group, 2010-14
- Company outlook
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RBS Group
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- Figure 69: Financial analysis of RBS Group, 2010-14
- Company outlook
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Santander UK
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- Figure 70: Financial analysis of Santander UK plc, 2010-14
- Company outlook
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Shawbrook Bank
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- Figure 71: Financial analysis of Shawbrook, 2010-14
- Company outlook
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- Figure 72: Profiled companies’ combined turnover, 2010-14
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Forecast
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- Key points
- Traditional (Mainstream) Lenders
- Gross lending expected to gradually improve to 2020
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- Figure 73: Forecast UK MFIs’ gross lending to non-financial businesses, 2016-20
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- Figure 74: Forecast UK MFIs’ net loans to non-financial businesses graph, 2016-20
- Loan write-offs anticipated to generally decline over the next five years
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- Figure 75: Write offs of loans to PNFCs from banks and building societies, 2016-20
- Costly ring-fencing requirements may raise fees and restrict credit
- Alternative finance
- Alternative market expected to more than double lending over the next five years
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- Figure 76: Forecast UK alternative lending market, by funding type, 2016-20
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- Figure 77: Forecast UK alternative lending market graph, by funding type, 2016-20
- Commercial property (Real Estate) finance
- Rising number of transactions to drive new commercial mortgage lending
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- Figure 78: Forecast gross value of annual loan originations, 2016-20
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- Figure 79: Forecast gross value of annual loan originations graph, 2016-20
- Total value of outstanding loans to stabilise over coming five years
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- Figure 80: Forecast value of outstanding loans secured on UK commercial property, 2016-20
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- Figure 81: Forecast value of outstanding loans secured on UK commercial property graph, 2016-20
Further Sources and Contacts
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- Trade associations
- Asset Based Finance Association
- British Bankers’ Association
- British Private Equity & Venture Capital Association
- Finance and Leasing Association
- Loan Market Association
- National Association of Commercial Finance Brokers
- Trade magazines
- Bridging & Commercial
- Commercial Property Monthly
- Credit Today
- The Banker
- Trade exhibitions
- Business Funding Show
- NACFB Commercial Finance Expo 2016
- Credit Summit 2016
- The 3rd Annual Institutional & Alternative Lending Conference
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