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Description

Description

Covered in this report

The most notable change in funding patterns since the financial crisis has been the reduction in bank lending. Between 2000 and 2007, average net lending by banks to UK non-financial corporates was £38 billion per year, but levels have not reached near this figure since.


Initially, much of the reduction in borrowing from banks was reflected in falling corporate leverage. Indeed, non-financial UK corporates were significant net issuers of equity, particularly in 2009. However, the reduction has also been associated with the increased use of other sources of debt, with different firms turning to different markets for non-bank financing.

“Despite the banking and lending landscape undergoing a period of change, the emergence of new challenger banks and lenders is unlikely to lead to the disappearance of big banks. Instead, more acquisitions and partnerships between larger banks and new entrants are likely to provide the best range of banking and finance options for customers.”
– Lewis Cone, Senior B2B Analyst

This report looks at the following areas:

  • Mainstream banks still finding it hard to adapt and implement new technology which could affect their, and their customers’, performance
  • Increasing financial support to SMEs disrupted by market exits

What's included

What's included

Table of contents

Table of contents

  1. Overview

    • What you need to know
      • Covered in this Report
      • Executive Summary

          • The market
            • Commercial deposits remain on upward trend
              • Figure 1: UK MFIs sterling deposits from UK resident businesses, Q2 2018-Q3 2019, (£ million outstanding of deposit liabilities, excluding under repo, not seasonally adjusted)
            • Professional, scientific and technical activities lead industry in terms of NFB deposits
              • Figure 2: MFI sterling deposits of UK resident non-financial businesses, by industry type, largest Six, November 2019, £ million)
            • Net lending remained positive in 2018 and most likely in 2019 as well
              • Figure 3: UK MFIs’ net loans to non-financial businesses, Q2 2018-Q3 2019, (£ million, not seasonally adjusted)
            • Deposits growth expected as the UK enters the Brexit transition period and beyond
              • Figure 4: Forecast UK MFIs sterling deposits from UK resident non-financial corporations, 2020-24, (£ billion at 2019 prices, % annual change)
            • What we think
            • Issues and Insights

              • Mainstream banks still finding it hard to adapt and implement new technology which could affect their, and their customers’, performance
                • The facts
                  • The implications
                    • Increasing financial support to SMEs disrupted by market exits
                      • The facts
                        • The implications
                        • The Market – What You Need to Know

                          • Commercial deposits remain on upward trend
                            • Deposits growth expected as the UK enters the Brexit transition period and beyond
                            • Commercial Banking Market

                              • Commercial deposits remain on upward trend
                                • Figure 5: UK MFIs sterling deposits from UK resident businesses, December 2017- November 2019, (£ million outstanding of deposit liabilities, excluding under repo, not seasonally adjusted)
                              • Professional, scientific and technical activities lead industries in terms of NFB deposits
                                • Figure 6: MFI sterling deposits of UK resident non-financial businesses, by industry type, largest Six, November 2019, £ million)
                              • SME loan applications fall while two thirds of loans head to outside of London and the South-East
                                • Lenders pass the BoE’s 2019 stress test although changes are forthcoming
                                • Commercial Borrowing

                                    • Net lending remained positive in 2018 and is expected to have been positive in 2019
                                      • Figure 7: UK MFIs’ net loans to non-financial businesses, Q3 2017-Q3 2019, by size of business, (£ million, not seasonally adjusted)
                                    • Commercial lending rates stabilise since 2018 following a rise over 2017
                                        • Figure 8: Average interest rate for UK MFI new advances to PNFCs, at November in 2015-19, (% not seasonally adjusted)
                                      • Credit availability and demand falls in 2019
                                        • Figure 9: Availability of corporate credit to PNFCs in the past three months, Q4 2015-Q4 2019, by business size, (net percentage balance)
                                        • Figure 10: Demand for corporate credit by PNFCs in the past three months, Q4 2015-Q4 2019, by business size, (net percentage balance)
                                    • Commercial Banking Market Forecast

                                      • Deposits growth expected as the UK enters the Brexit transition period and beyond
                                          • Figure 11: Forecast UK MFIs sterling deposits from UK resident non-financial corporations, 2020-24, (£ billion at 2019 prices, % annual change)
                                        • Technology-drive leading towards a new ‘Open X’ era
                                          • Business banking resolution scheme aims to transform dispute process
                                          • The Impact of the Economy

                                            • Annual GDP growth falls to six-year low in 2018 and continues to fall in 2019
                                              • Figure 12: Annual GDP growth rate, 2015 -19*, (% annual change)
                                          • Market Trends

                                              • Online banking most commonly used to carry out banking activities
                                                  • Figure 13: Channels used to carry out various business banking activities, June 2019, (% of respondents)
                                                • Younger businesses most likely to use mobile banking with supplier payments most common activity
                                                  • Figure 14: Use of mobile banking services when carrying out business activities, by age of business, June 2019, (% of respondents)
                                                • Rise in the number switching accounts but opportunities remain vast
                                                  • Business confidence at a decade-low in Q4 2019 with many continuing to delay financing plans
                                                    • Figure 15: Business confidence index, per half-year, Q2 2009-Q4 2019, (index figure)
                                                  • Write-offs on loans to PNFCs rise for first time in four years in 2018 but likely to have fallen in 2019
                                                    • Figure 16: Write offs of loans to PNFCs from banks and building societies, 2014-19*, (£ million, not seasonally adjusted)
                                                • Market Drivers

                                                  • UK leaves the EU with a transition period concluding in December 2020 but the threat of ‘no-deal’ remains and continues to fuel uncertainty
                                                    • Large corporates account for almost half of all private sector turnover
                                                      • Figure 17: Business population in the UK, private sector, by company size, 2015-19, (number, £ billion and millions employed)
                                                    • Both business investment levels and private sector profitability fall
                                                      • Figure 18: UK PNFCs’ average net rate of return, 2015-19*, (% return)
                                                      • Figure 19: UK total business investment, 2014-18, (chained volume measures and not seasonally-adjusted, £ billion and % annual change)
                                                    • Company insolvencies marginally fall in 2019, but difficult environment likely to cause further casualties going forward
                                                        • Figure 20: Company insolvencies in England and Wales, 2015-19, (number)
                                                      • Inward and domestic M&A deals rose significantly in 2018 as the relatively low pound and exit from the EU drove investor activity
                                                        • Figure 21: Mergers and acquisitions of UK companies, 2014-18, (units)
                                                      • Although 86% of small businesses’ finances are ‘healthy’ or ‘OK’, a fifth have missed out on business opportunities due to a lack of funding
                                                        • Figure 22: Current finance situation of the business, June 2017 vs June 2018 vs June 2019, (% of respondents)
                                                    • Companies and Brands – What You Need to Know

                                                      • Challenger banks continue expansion but traditional banks still dominate market share
                                                        • Lloyds, NatWest and Barclays combine to open business banking hubs
                                                        • Industry Structure

                                                          • Industry development
                                                            • Challenger banks continue expansion, but traditional banks still dominate market share
                                                                • Figure 23: Market share for business bank accounts, June 2019, (%)
                                                              • Handelsbanken provides best overall service quality to SMEs while Barclays provides best online and mobile services
                                                                • The number of banks and building societies hit five-year low in 2019
                                                                    • Figure 24: Number of banks and building societies operating in the UK, 2015-19
                                                                • Competitive Strategies

                                                                  • Lloyds, NatWest and Barclays combine to open business banking hubs
                                                                    • Revolut targets business banking growth as it launches expenses management tool
                                                                      • Lloyds Bank Commercial teams up with Optal to offer streamlined payments
                                                                        • HSBC launches Treasury APIs for payments in 27 markets
                                                                        • Company Profiles

                                                                          • Aldermore Bank
                                                                            • Recent company activity
                                                                              • Financial information
                                                                                • Figure 25: Financial analysis of Aldermore Bank plc, 2014-19*, (£ million)
                                                                              • Barclays plc
                                                                                • Recent company activity
                                                                                  • Financial information
                                                                                    • Figure 26: Financial analysis of Barclays plc, 2014-18, (£ million)
                                                                                  • Co-operative Bank
                                                                                    • Recent company activity
                                                                                      • Financial information
                                                                                        • Figure 27: Financial analysis of Co-operative Bank plc, 2014-18, (£ million)
                                                                                      • HSBC Bank plc
                                                                                        • Recent company activity
                                                                                          • Financial information
                                                                                            • Figure 28: Financial analysis of HSBC Bank, 2014-18, (£ million)
                                                                                          • Lloyds Banking Group
                                                                                            • Recent company activity
                                                                                              • Financial information
                                                                                                • Figure 29: Financial analysis of Lloyds Banking group, 2014-18, (£ million)
                                                                                              • RBS Group
                                                                                                • Recent company activity
                                                                                                  • Financial information
                                                                                                    • Figure 30: Financial analysis of RBS Group, 2014-18, (£ million)
                                                                                                  • Santander UK plc
                                                                                                    • Recent company activity
                                                                                                      • Financial information
                                                                                                        • Figure 31: Financial analysis of Santander UK plc, 2014-18, (£ million)
                                                                                                      • Virgin Money UK (formerly known as Clydesdale Bank plc)
                                                                                                        • Recent company activity
                                                                                                          • Financial information
                                                                                                            • Figure 32: Financial analysis of Clydesdale Bank plc, 2015-19, (£ million)
                                                                                                        • Appendix - Data Sources, Abbreviations and Supporting Information

                                                                                                            • Abbreviations
                                                                                                              • Methodology
                                                                                                              • Further Sources and Contacts

                                                                                                                • Trade Associations
                                                                                                                  • Trade Magazines
                                                                                                                    • Trade Exhibitions

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