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, Q4 2014 - Q3 2016, by size of business
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- Figure 2: UK MFIs’ cumulative net lending to UK non-financial businesses, 2014-15, by industrial sector
- Market trends
- Market factors
- Brexit creates opportunities for business banking providers to deepen customer relationships
- Commercial property transactions continue to rise
- Profitability and business investment in the private sector rose in 2015 but may stagnate in 2016
- Reports of falling business confidence at odds with rise in M&A activity
- Industry structure
- Forecast
- Gross lending expected to remain stable to 2021
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- Figure 3: Forecast UK MFIs’ net loans ro non-financial businesses, 2017-21
- Alternative market expected to nearly double its lending by 2021
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- Figure 4: Forecast UK alternative lending market, by funding type, 2017-21
- Total value of outstanding debt set to rise alongside short-term market uncertainty
- What we think
Key Insights
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- How has the UK’s vote to leave the EU already impacted the market?
- How did challenger banks perform in 2015? Have mainstream banks reacted in any way?
- What does the future hold for commercial borrowing?
Introduction
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- Definitions
- Methodology
- Abbreviations
- Market positioning
UK Economy
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- Key points
- Overview
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- Figure 5: UK GDP, 2006-16
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- Figure 6: UK output, by industry, 2008-16
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- Figure 7: Quarters after GDP peak, 1979, 1990 and 2008
- Inflation
- Interest rates
- House prices
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- Figure 8: UK house price changes, 2006-16
- Consumer spending
- Manufacturing
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- Figure 9: UK manufacturing, 2014-16
- Business investment
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- Figure 10: UK GFCF 2005-15
- Imports
- Exports
Market Factors
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- Key points
- Uncertainties surrounding economic growth yet to be realised
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- Figure 11: GDP growth rate, Q1 2012- Q3 2016
- Figure 12: GDP growth rate, Q1 2012 - Q3 2016
- Brexit creates opportunities for business banking providers to deepen customer relationships
- Recent market changes have provided extra barrier to providing finance to SMEs
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- Figure 13: Company insolvencies in England and Wales, 2011-15
- Commercial property transactions continue to rise
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- Figure 14: Number of non-residential property transactions, 2011-15
- Figure 15: Number of non-residential property transactions, 2011-15
- Profitability and business investment in the private sector rose in 2015 but may stagnate in 2016
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- Figure 16: UK PNFCs net rate of return, Q2 2011 - Q2 2016
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- Figure 17: UK total business investment, 2011-16*
- Figure 18: UK total business investment, 2011-16*
- Reports of falling business confidence at odds with rise in M&A activity
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- Figure 19: Mergers and acquisitions of UK companies, 2011-2016*
- Government schemes
- British Business Bank
- Business Finance Support Finder
- Enterprise Finance Guarantee
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- Figure 20: EFG lending, by number and value of loans offered and by number and value of loans drawn, 2009-15*
- The National Loan Guarantee Scheme
- Funding for Lending Scheme
- BoE Stress Test
Market Size
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- Key points
- Net lending on a pathway to recovery...
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- Figure 21: UK MFIs’ net loans to non-financial businesses, Q4 2014 - Q3 2016, by size of business
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- Figure 22: UK MFIs’ net loans to non-financial businesses, Q4 2014 - Q3 2016, by size of business
- ... although outstanding loan amounts are on an upwards course over 2016
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- Figure 23: UK total loan amounts outstanding to MFIs from non-financial businesses, November 2014 - October 2016, by size of business
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- Figure 24: M4 loan amounts outstanding from PNFCs, November 2014 - October 2016
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- Figure 25: M4 loan amounts outstanding from PNFCs, November 2014 - October 2016
- Market segmentation
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- Figure 26: UK MFIs’ cumulative net lending to UK non-financial businesses, 2014-15, by industrial sector
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- Figure 27: UK MFIs’ cumulative net lending to UK non-financial businesses, 2014-15, by industrial sector
- Further segmentation
- Alternative finance
- Peer-to-peer lending and crowdfunding
- Funding Circle continues to lead P2P business lending
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- Figure 28: P2P business lending volume and market share, by lender, 2016*
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- Figure 29: P2P business lending volume, by lender, 2016*
- Manufacturing industries and professional services apply for most P2P business loans
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- Figure 30: P2P business borrowers, by industrial sector, 2014
- Crowdcube leads crowdfunding market, albeit with only four major competitors
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- Figure 31: Crowdfunding volume and market share, by lender, 2016*
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- Figure 32: Crowdfunding lending volume, by lender, 2016*
- Bridging finance
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- Figure 33: UK bridging loans market value, in aggregated loan balances, 2012-16
- Commercial property (real estate) finance
- Upward pressure on yields due to uncertainty
- Debt rises for first time since 2008
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- Figure 34: Aggregated value of outstanding debt in loan books secured on UK commercial property, 2011-15
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- Figure 35: Aggregated volume of outstanding debt in loan book secured on UK commercial property, 2011-15
- Loan originations continue to rise, but uncertainties could derail momentum
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- Figure 36: Gross value of annual loan originations, 2011-15
- UK banks and building societies’ share of new loan originations declines
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- Figure 37: Gross value of loan originations, by allocation, 2011-15
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- Figure 38: Value of outstanding loan books secured on UK commercial property, 2015, 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 39: Allocation of outstanding loans to investment and owner-occupied property, by type of use, 2014
- Loans secured against ‘alternative’ real estate overtakes traditional real estate for the first time
- SME Finance
- SME funding gap
- Improvements made to alternative finance accessibility
- London and the south east account for a third of SME lending in Britain
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- Figure 40: SME turnover and lending, by region, December 2015
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- Figure 41: SME lending, by region, December 2015
- SMEs most in need of finance for cash flow and capital equipment
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- Figure 42: SME lending, by reason, 2015
- Value of SME loan balances has declined since 2013
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- Figure 43: Value of SME loan balances, by region, 2012-16*
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- Figure 44: Value of SME loan balances, by Region, 2012-15
Market Trends
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- Key points
- Business confidence influences borrowing demand, but latest index figures draw concern
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- Figure 45: Business confidence index, per half-year, 2006-16
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- Figure 46: Business confidence index, per half-year, 2006-16
- Write offs on loans to non-financial companies continues to fall
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- Figure 47: Write offs of loans to PNFCs from banks and building societies, 2011-16*
- Demand for credit falls in 2016 with availability stagnating
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- Figure 48: Availability of corporate credit to PNFCs in the last three months, Q4 2010 - Q3 2016, by business size
- Figure 49: Availability of corporate credit to PNFCs in the last three months, Q4 2010 - Q3 2016, by business size
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- Figure 50: Demand for corporate credit by PNFCs in the last three months, Q4 2010 - Q3 2016, by business size
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- Figure 51: Demand for corporate credit to PNFCs in the last three months, Q4 2010 - Q3 2016, by business size
- Commercial lending rates experience further decline
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- Figure 52: Average interest rate for UK MFI new advances to PNFCs, at October in 2012-16
- Funding for Lending scheme extended once again until 2018
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- Figure 53: Net loans to UK SMEs from FLS participants, 2014-15
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- Figure 54: Net loans to UK SMEs from FLS participants, 2014-15
Industry Structure
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- Key points
- Industry development
- Challenger banks on the rise, but market obstacles likely to protect existing players
- Banking license application process has been made easier, but the number of application withdrawals has risen...
- ... and therefore the number of banks and building societies has remained fairly constant since 2013
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- Figure 55: Number of banks and building societies operating in the UK, 2013-16
- Figure 56: Number of banks and building societies operating in the UK, 2013-15
Company Profiles
Aldermore Bank
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- Figure 57: Financial analysis of Aldermore Bank plc, 2011-15
- Company strategy
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Barclays Plc
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- Figure 58: Financial analysis of Barclays plc, 2011-15
- Company strategy
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Clydesdale Bank Plc
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- Figure 59: Financial analysis of Clydesdale Bank Plc, 2012-16
- Company strategy
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Funding Circle
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- Figure 60: Financial analysis of Funding Circle, 2011-15
- Company strategy
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GE Capital UK
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- Figure 61: Financial analysis of GE Capital Bank Limited, 2011-15
- Company strategy
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HSBC Bank plc
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- Figure 62: Financial analysis of HSBC Bank, 2011-15
- Company strategy
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Lloyds Banking Group
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- Figure 63: Financial analysis of Lloyds Banking Group, 2011-15
- Company strategy
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RBS Group
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- Figure 64: Financial analysis of RBS Group, 2011-15
- Company strategy
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Santander UK
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- Figure 65: Financial analysis of Santander UK Plc, 2011-15
- Company strategy
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Shawbrook Bank
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- Figure 66: Financial analysis of Shawbrook, 2011-15
- Company strategy
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- Figure 67: Profiled companies’ combined turnover, 2011-15
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Forecast
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- Key points
- Traditional (mainstream) lenders
- Gross lending expected to remain stable to 2021
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- Figure 68: Forecast UK MFIs’ net loans to non-financial businesses, 2017-21
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- Figure 69: Forecast UK MFIs’ net loans to non-financial businesses, 2017-21
- Loan write-offs anticipated to decline to 2019 before rising thereafter
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- Figure 70: Write offs of loans to PNFCs from banks and building societies, 2017-21
- SME finance
- Alternative finance
- Alternative market expected to nearly double its lending by 2021
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- Figure 71: Forecast UK alternative lending market, by funding type, 2017-21
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- Figure 72: Forecast UK alternative lending market, by funding type, 2017-21
- Commercial property (real estate) finance
- Lower economic growth and the low interest rate environment will impact commercial mortgage lending
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- Figure 73: Forecast gross value of annual loan originations, 2016-20
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- Figure 74: Forecast gross value of annual loan originations, 2016-20
- Total value of outstanding debt set to rise alongside short-term market uncertainty
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- Figure 75: Forecast value of outstanding debt in loan books secured on UK commercial property, 2016-20
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- Figure 76: Forecast value of outstanding debt in loan books secured on UK commercial property, 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 Strategy
- The Banker
- Trade exhibitions
- Business Funding Show
- NACFB Commercial Finance Expo 2017
- Credit Summit 2017
- The 4th Annual Institutional & Alternative Lending Conference
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