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Commercial Borrowing - UK - November 2018

“All businesses look to financial institutions for lending in order to make vital growth developments and other operational processes possible. Whilst the structure of commercial borrowing continues to change with the emergence of new alternative lenders, mainstream lenders must continue to offer the most suitable products for companies so that they can succeed.”
– Lewis Cone, Senior B2B Analyst

This report looks at the following areas:

  • Lack of knowledge and understanding of the variety of external finance options available still exists, especially among small business community
  • Greater protection for borrowers in light of growing uncertainty

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Table of contents

  1. Overview

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

          • The market
            • Net lending remained positive in 2017 and is likely to be positive in 2018
              • Figure 1: UK MFIs’ Net Loans to Non-Financial Businesses, Q3 2016 - Q3 2018, (£ Million, NSA)
            • Outstanding loan amounts remain on an upward trajectory
              • Figure 2: UK total loan amounts outstanding to mfis from non-financial businesses, October 2016 - September 2018, (£ million, not seasonally adjusted)
            • Write-offs on loans to non-financial companies fall to eight-year low in 2017 but are expected to rebound in 2018
              • Figure 3: Write offs of loans to PNFCs from banks and building societies, 2013-18*, (£ million, not seasonally adjusted)
            • Gross lending expected to rise by an average of 3% per year to 2023
              • Figure 4: Forecast UK MFIs’ gross lending to non-financial businesses, 2019-23, (£ million, not seasonally adjusted)
            • Companies and brands
              • What we think
              • Issues and Insights

                • Lack of knowledge and understanding of the variety of external finance options available still exists, especially among small business community
                  • The facts
                    • The implications
                      • Greater protection for borrowers in light of growing uncertainty
                        • The facts
                          • The implications
                          • The Market – What You Need to Know

                            • Net lending remained positive in 2017 and is likely to be positive in 2018
                              • Gross lending expected to rise by an average of 3% per year to 2023
                                • Write-offs on loans to non-financial companies fall to eight-year low in 2017 but are expected to rebound in 2018
                                • Market Size

                                    • Net lending remained positive in 2017 and is likely to be positive in 2018
                                      • Figure 5: UK MFIs’ net loans to non-financial businesses, Q3 2016-Q3 2018, by size of business, (£ million, not seasonally adjusted)
                                    • …whilst outstanding loan amounts remain on an upward trajectory
                                        • Figure 6: UK total loan amounts outstanding to MFIs from non-financial businesses, October 2016-September 2018, by size of business, (£ million, not seasonally adjusted)
                                        • Figure 7: M4 loan amounts outstanding from PNFCs, October 2016-September 2018, (£ million, not seasonally adjusted)
                                    • Market Segmentation

                                        • Figure 8: UK total loan amounts outstanding to SMEs, September 2018, by industrial sector, (£ billion, not seasonally adjusted)
                                        • Figure 9: UK total loan amounts outstanding to large businesses, September 2018, by industrial sector, (£ billion, not seasonally adjusted)
                                    • Further Segmentation

                                        • Alternative finance
                                          • Peer-to-peer business lending
                                            • Assetz Capital accounts for most reported lending in the P2P business area
                                                • Figure 10: P2P business senders, cumulative lending and market share, (in £ million and %)
                                              • Bridging Finance
                                                  • Figure 11: UK bridging loans market value, in aggregated loan balances, 2014-18, (£ billion and % annual change)
                                                • Commercial Property (Real Estate) Finance
                                                  • Yields fall in 2017 and remain below the long-term average in 2018 to date
                                                    • Debt marginally falls in 2017
                                                      • Figure 12: Aggregated value of outstanding debt in loan books secured on UK commercial property, 2013-17, (£ billion)
                                                    • Loans originations remain stable despite uncertainties applying downward pressure
                                                      • Figure 13: Gross value of annual loan originations, 2013-17, (£ Billion)
                                                    • UK banks and building societies’ share of gross value of loan originations rises to five-year high
                                                      • Figure 14: Gross value of loan originations, by allocation, 2016-17, (% of total)
                                                    • SME funding gap
                                                      • Bank referral scheme helps secure more funding for SMEs but more needs to be done
                                                        • SMEs still using most finance for working capital and cash flow needs
                                                          • Figure 15: SME Lending, by reason, 2017, (%)
                                                        • Value of SME loan balances reaches five-year low in 2017
                                                          • Figure 16: Value of SME loan balances, by region, 2014-18*, (£ Million)
                                                      • Market Forecast

                                                          • Gross lending expected to rise by an average of 3% per year to 2023
                                                              • Figure 17: Forecast UK MFIs’ gross lending to non-financial businesses, 2019-23, (£ million, not seasonally adjusted)
                                                            • Loan write-offs anticipated to peak in 2021
                                                              • Figure 18: Write offs of loans to PNFCs from banks and building societies, 2019-23, (£ million, not seasonally adjusted)
                                                          • The Impact of the Economy

                                                            • GDP growth rebounds in Q2 but challenges remain
                                                              • Figure 19: GDP growth rate, Q2 2014-Q2 2018, (% change on previous quarter)
                                                          • Market Trends

                                                            • Business confidence turns negative in H2 2018 with uncertainty affecting demand for finance
                                                              • Figure 20: Business confidence index, per half-year, Q2 2008-Q4 2018, (index figure)
                                                            • Write-offs on loans to non-financial companies fall to eight-year low in 2017 but are expected to rebound in 2018
                                                              • Figure 21: Write offs of loans to PNFCs from banks and building societies, 2013-18*, (£ million, not seasonally adjusted)
                                                            • Credit availability stagnates and demand falls in 2018
                                                              • Figure 22: Availability of corporate credit to PNFCs in the last three months, Q4 2012-Q3 2018, by business size, (net percentage balance)
                                                              • Figure 23: Demand for corporate credit by PNFCs in the last three months, Q4 2012-Q3 2018, by business size, (net percentage balance)
                                                            • Commercial lending rates rise in 2018 to reverse recent downward trend
                                                              • Figure 24: Average interest rate for UK MFI new advances to PNFCs, at September in 2014-18, (% not seasonally adjusted)
                                                          • Market Drivers

                                                            • The threat of a no-deal Brexit drives borrowing uncertainty
                                                              • Company insolvencies rise again, highlighting the tough business market…
                                                                  • Figure 25: Company insolvencies in England and Wales, 2013-17, (number)
                                                                • …although commercial property transactions continue to rise
                                                                  • Figure 26: Number of non-residential property transactions, 2013-17, (number, seasonally adjusted)
                                                                • Business investment levels rise while profitability continues to stagnate in the private sector
                                                                  • Figure 27: UK PNFCs net rate of return, Q2 2013-Q2 2018, (% return)
                                                                  • Figure 28: UK total business investment, 2013-17, (chained volume measures and not seasonally-adjusted, £ billion)
                                                                • Number of inward and domestic M&A deals fall in 2017 but the relatively low value of the pound continues to attract investors
                                                                  • Figure 29: Mergers and acquisitions of UK companies, 2013-17, (number of companies)
                                                                • Government schemes
                                                                  • British Business Bank
                                                                    • Business Finance Support Finder
                                                                      • Enterprise Finance Guarantee
                                                                          • Figure 30: EFG lending, by number and value of loans offered and by number and value of loans drawn, 2009-18*, (units and £ million)
                                                                        • BoE Stress Test
                                                                        • Companies and Brands – What You Need to Know

                                                                          • Open banking will lead to commercial banking changes
                                                                            • Lenders begin boosting SME funding options
                                                                            • Industry Structure

                                                                              • Industry development
                                                                                • Open banking will lead to commercial banking changes
                                                                                  • The number of banks and building societies has remained fairly constant since 2014
                                                                                      • Figure 31: Number of banks and building societies operating in the UK, 2014-18
                                                                                  • Competitive Strategies

                                                                                    • Lenders begin boosting SME funding options
                                                                                      • New platform launched to help businesses navigate funding market
                                                                                      • Company Profiles

                                                                                        • Barclays PLC
                                                                                          • Recent company activity
                                                                                            • Financial information
                                                                                              • Figure 32: Financial analysis of barclays plc, 2013-17, (£ million)
                                                                                            • Funding Circle
                                                                                              • Recent company activity
                                                                                                • Financial information
                                                                                                  • Figure 33: Financial analysis of funding circle, 2013-17, (£ 000)
                                                                                                • HSBC Bank plc
                                                                                                  • Recent company activity
                                                                                                    • Financial information
                                                                                                      • Figure 34: Financial analysis of HSBC bank, 2013-17, (£ million)
                                                                                                    • Lloyds Banking Group
                                                                                                      • Recent company activity
                                                                                                        • Financial information
                                                                                                          • Figure 35: Financial analysis of Lloyds Banking Group, 2013-17, (£ million)
                                                                                                        • RBS Group
                                                                                                          • Recent company activity
                                                                                                            • Financial information
                                                                                                              • Figure 36: Financial analysis of RBS Group, 2013-17, (£ million)
                                                                                                            • Santander UK plc
                                                                                                              • Recent company activity
                                                                                                                • Financial information
                                                                                                                  • Figure 37: Financial analysis of Santander UK plc, 2013-17, (£ million)
                                                                                                                • Shawbrook Bank
                                                                                                                  • Recent company activity
                                                                                                                    • Financial Information
                                                                                                                      • Figure 38: Financial analysis of Shawbrook Bank, 2013-17, (£ million)
                                                                                                                  • Appendix – Data Sources, Abbreviations and Supporting Information

                                                                                                                      • Abbreviations
                                                                                                                        • Methodology
                                                                                                                        • Further Sources and Contacts

                                                                                                                          • Trade Associations
                                                                                                                            • Trade Magazines
                                                                                                                              • Trade Exhibitions

                                                                                                                              Commercial Borrowing - UK - November 2018

                                                                                                                              US $1,272.90 (Excl.Tax)