Table of Contents
Executive Summary
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- The market
- Net lending remained positive in 2018 and is likely to be positive in 2019
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- Figure 1: UK MFIs’ net loans to non-financial businesses, Q2 2018 - Q3 2019, (£ million, NSA)
- Outstanding loan amounts remain on an upward trend
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- Figure 2: UK total loan amounts outstanding to MFIs from non-financial businesses, May - October 2019, (£ million, not seasonally adjusted)
- First rise in four years for loan write-offs but another fall is likely in 2019
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- Figure 3: Write offs of loans to PNFCs from banks and building societies, 2014-19*, (£ million, not seasonally adjusted)
- Gross lending expected to rise by an average of 3.2% per year to 2024
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- Figure 4: Forecast UK MFIs’ gross lending to non-financial businesses, 2020-24, (£ million, not seasonally adjusted)
- Companies and brands
- What we think
Issues and Insights
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- Calls for greater regulation in the commercial lending sector
- The facts
- The implications
- Increasing financial support to SMEs disrupted by market exits
- The facts
- The implications
The Market – What You Need to Know
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- Net lending remained positive in 2018 and is expected to be positive in 2019
- Outstanding loan amounts remain on an upward trend
- Gross lending expected to rise by an average of 3.2% per year to 2024
Market Size
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- Net lending remained positive in 2018 and is expected to be positive in 2019
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- Figure 5: UK MFIs’ net loans to non-financial businesses, Q3 2017 – Q3 2019, by size of business, (£ million, not seasonally adjusted)
- Outstanding loan amounts remain on an upward trend
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- Figure 6: UK total loan amounts outstanding to MFIs from non-financial businesses, November 2017 - October 2019, by size of business, (£ million, not seasonally adjusted)
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- Figure 7: M4 loan amounts outstanding from PNFCs, November 2017 - October 2019, (£ million, not seasonally adjusted)
Market Segmentation
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- Figure 8: UK total loan amounts outstanding to SMEs, October 2019, by industrial sector, (£ billion, not seasonally adjusted)
- Figure 9: UK total loan amounts outstanding to large businesses, October 2019, by industrial sector, (£ billion, not seasonally adjusted)
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Further Segmentation
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- Alternative finance
- Peer-to-peer business lending
- Assetz Capital has lent the most in the P2P business sector
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- Figure 10: P2P business lenders, cumulative lending, At 30 September 2019, (£ million)
- Bridging finance
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- Figure 11: UK bridging loans market value, in aggregated loan balances, 2015-19, (£ billion and % annual change)
- Commercial property (real estate) finance
- Total outstanding debt rises to five-year high in 2018
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- Figure 12: Aggregated value of outstanding debt in loan books secured on UK commercial property, 2014-18, (£ billion)
- New lending rose by 11% in 2018
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- Figure 13: Gross value of annual loan originations, 2014-18, (£ billion)
- Market report data
- Non-banks continue to grow presence in new lending
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- Figure 14: Gross value of loan originations, by allocation, 2017 and 2018, (% of total)
- SME finance
- SME funding gap
- Working capital and cash flow needs are still the main reasons for SMEs requiring funds
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- Figure 15: SME lending, by reason, 2018, (%)
- Value of SME loan balances rebounds from five-year low in 2018
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- Figure 16: Value of SME loans outstanding, by region, 2015-19*, (£ million)
Market Forecast
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- Gross lending expected to rise by an average of 3.2% per year to 2024
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- Figure 17: Forecast UK MFIs’ gross lending to non-financial businesses, 2020-24, (£ million, not seasonally Adjusted)
- Loan write-offs anticipated to peak in 2021 before declining in the following two years
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- Figure 18: Write offs of loans to PNFCs from banks and building societies, 2020-24, (£ million, not seasonally adjusted)
The Impact of the Economy
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- Annual GDP growth falls to six-year low in 2018 and continues to fall in 2019
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- Figure 19: Annual GDP growth rate, 2015 – 2019*, (annual % Change)
Market Trends
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- Business confidence at a decade-low in Q4 2019 with many continuing to delay financing plans
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- Figure 20: Business confidence index, per half-year, Q2 2009 - Q4 2019, (index figure)
- Write-offs on loans to NFCs rise for first time in four years in 2018 but likely to fall in 2019
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- Figure 21: Write offs of loans to PNFCs from banks and building societies, 2014-19*, (£ million, not seasonally adjusted)
- Credit availability and demand falls in 2019
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- Figure 22: Availability of corporate credit to PNFCs in the last three months, Q4 2013 - Q3 2019, by business size, (net percentage balance)
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- Figure 23: Demand for corporate credit by PNFCs in the last three months, Q4 2013 - Q3 2019, by business size, (net percentage balance)
- Commercial lending rates fall in 2019 following a rise in 2018
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- Figure 24: Average interest rate for UK MFI new advances to PNFCs, at October in 2015-2019, (% not seasonally adjusted)
Market Drivers
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- Brexit impasse and the prospect of a no-deal’ outcome continues to affect borrowing plans
- Company insolvencies are likely to rise in 2019 leading to a further reduction in lending opportunities
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- Figure 25: Company insolvencies in England and Wales, 2014-18, (number)
- Commercial property transactions fall in 2018 but reach two-year high in October 2019
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- Figure 26: Number of non-residential property transactions, 2014-18, (number, seasonally adjusted)
- Business investment levels fall alongside stagnant profitability in the private sector
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- Figure 27: UK PNFCs net rate of return, Q2 2014 - Q2 2019, (% return)
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- Figure 28: UK total business investment, 2014-18, (chained volume measures and not seasonally-adjusted, £ billion)
- Inward and domestic M&A deals rose significantly in 2018 as the relatively low pound and expected exit from the EU drove investor activity
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- Figure 29: Mergers and acquisitions of UK companies, 2014-18, (number of companies)
- Government schemes
- British Business Bank
- Business Finance Support Finder
- Enterprise Finance Guarantee
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- Figure 30: EFG lending, by number and value of loans offered and by number and value of loans drawn, 2009-19*, (units and £ million)
- BoE Stress Test
Companies and Brands – What You Need to Know
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- New platforms launched for commercial brokers
- Lloyds Bank becomes first bank to partner with a blockchain trade finance platform
Industry Structure
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- Industry development
- New platforms launched for commercial brokers
- The number of banks and building societies has marginally declined since 2017
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- Figure 31: Number of banks and building societies operating in the UK, 2015-19
Competitive Strategies
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- Lenders pledge to support smaller businesses
- Knight Capital enters UK market to take advantage of post-Brexit opportunities with a focus on personalised services
- Lloyds Bank becomes first bank to partner with a blockchain trade finance platform
Company Profiles
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- Barclays PLC
- Recent company activity
- Financial information
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- Figure 32: Financial analysis of Barclays plc, 2014-18, (£ million)
- Funding Circle
- Recent company activity
- Financial information
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- Figure 33: Financial analysis of funding circle, 2014-18, (£ 000)
- HSBC Bank plc
- Recent company activity
- Financial information
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- Figure 34: Financial analysis of HSBC bank, 2014-18, (£ million)
- Lloyds Banking Group
- Recent company activity
- Financial information
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- Figure 35: Financial analysis of Lloyds Banking Group, 2014-18, (£ million)
- RBS Group
- Recent company activity
- Financial information
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- Figure 36: Financial analysis of RBS Group, 2014-18, (£ million)
- Santander UK plc
- Recent company activity
- Financial information
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- Figure 37: Financial analysis of Santander UK plc, 2014-18, (£ million)
- Shawbrook Bank
- Recent company activity
- Financial Information
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- Figure 38: Financial analysis of Shawbrook Bank, 2014-18, (£ 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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