2022
9
UK Commercial Banking and Finance Market Report 2022
2022-05-10T04:02:45+01:00
OX1100321
1495
151096
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Report
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“The financial effects and business disruption of the pandemic have undoubtedly challenged businesses and will continue to scar some for quite some time. While this will lead to increased due…

UK Commercial Banking and Finance Market Report 2022

£ 1,495 (Excl.Tax)

Description

The UK Commercial Banking and Finance report identifies consumer attitudes towards the impact of COVID-19 and Brexit on commercial banking in the UK. This market report covers the market size, market forecast, market segmentation and industry trends for the Commercial Banking and Finance market in the UK.

Current Market Landscape

Deposits from NFCs have risen across all sectors over the past two years due to the impact of the pandemic, with businesses looking to keep cash in reserve to help them survive and recover in the current business climate.

  • Professional, scientific, and technical activities account for 17% of total non-financial corporations’ (NFCs’) deposits combined.
  • Deposits for the ‘electricity, gas and water supply’ sector rose by 33% between March 2020 and February 2022.
  • Over the review period, large businesses accounted for 71% of gross loans obtained.

The increase in deposits reflects higher demand for liquid assets, as the pandemic has put pressure on many businesses’ cashflows. To increase cash deposits and improve their liquidity position, private non-financial corporations (PNFCs) have raised funds through bond issuance.

Future Market Trends in Commercial Banking and Finance

Many companies had to borrow to maintain their finances during the COVID-19 outbreak and the provision of state-backed debt through commercial lenders has been at the core of government measures to support the economy. However, there are fears that many SMEs have taken on debt they will struggle to repay, inflicting loan losses on banks.

For this reason, deposits will remain high over the next couple of years as many business owners will choose to hold back on investments, keeping a greater proportion of their business’ income in current and savings accounts to provide a financial buffer.

Read on to discover more details or take a look at all of our UK Financial Services market research

Quickly understand

  • The impact of COVID-19 and Brexit on commercial banking and finance services.
  • How the industry will adapt to the post-COVID-19 and Brexit environment.
  • The value of the market in 2022 and beyond.

Covered in this report

Brands: Santander (Abbey National Treasury Services, Cater Callen, Alliance & Leicester), Lloyds Banking Group (Bank of Scotland, Lloyds TSB, AMB Bank, Scottish Widows Bank),  HSBC (Marks & Spencer Financial Services), Barclays, Virgin Money, The Royal Bank of Scotland (Adam and Company, Coutts & Co, National Westminster Bank, Ulster Bank), JPMorgan, Starling Bank, Aldermore Bank, Cooperative Bank.

Expert analysis from a specialist in the field

This report, written by Utku Tansel, a leading analyst in the Retail sector, delivers in-depth commentary and analysis to highlight current trends and add expert context to the numbers.

The financial effects and business disruption of the pandemic have undoubtedly challenged businesses and will continue to scar some for quite some time. While this will lead to increased due diligence, risk aversion and a slowdown in certain types of banking services, it will also encourage business and lender innovation and creativity alike.

Utku Tansel - European Retail AnalystLewis Cone
Senior B2B Analyst

Table of Contents

  1. Overview

    • What you need to know
    • Key issues covered in this Report
    • Market context
    • Products covered in this Report
  2. Executive Summary

    • The five-year outlook for commercial banking and finance
      • Figure 1: Five-year outlook for commercial banking and finance, 2022-26
    • The market
    • Commercial deposits continue to rise as companies adapt to changing business climate
      • Figure 2: UK MFI Sterling deposits from UK-resident businesses, Q3 2020-Q4 2021 (£ million, NSA)
    • Professional, scientific and technical activities lead industries in terms of NFC deposits
      • Figure 3: MFI Sterling deposits of UK-resident non-financial businesses, by industry type, largest six, February 2022 (£ million)
    • Net lending remained positive in 2021 but at a significantly lower level than the post-financial crisis high seen in 2020
      • Figure 4: UK MFI net loans to non-financial businesses, Q3 2020-Q4 2021 (£ million, NSA)
    • NFC deposits expected to grow by a cumulative 21% to 2026 as UK business climate remains uncertain
      • Figure 5: Forecast UK MFI Sterling deposits from UK-resident non-financial corporations, 2022-26 (£ billion at 2021 prices, % annual change)
  3. Issues and Insights

    • Sanctions imposed in relation to the Russia-Ukraine conflict lead businesses to undertake risk assessments
    • Funding gap remains for SMEs but the level of defaults and repayments from the COVID support schemes may dampen any rise in demand for finance
  4. Commercial Banking Market

    • Commercial deposits continue to rise as companies adapt to business climate
      • Figure 6: UK MFI Sterling deposits from UK-resident businesses, including under repo and NSA, 2020-22 (£ million outstanding of deposit liabilities)
    • Professional, scientific and technical activities lead industries in terms of NFC deposits
      • Figure 7: MFI Sterling deposits of UK-resident non-financial businesses, by industry type, largest six industries, February 2022 (£ million)
    • SME loan demand falls as government support schemes end
    • All of the UK’s major banks pass the BoE’s 2021 stress test but the countercyclical buffer returns
  5. Commercial Borrowing

    • COVID-19 lending schemes
    • Business debt levels
    • Net lending overview
    • Net lending remained positive in 2021 but at a significantly lower level than the post-financial crisis high seen in 2020
      • Figure 8: UK MFI net loans to non-financial businesses, by size of business, Q4 2019-Q4 2021 (£ million, not seasonally adjusted)
    • Commercial lending rates rise in 2021 although there are tentative signs of a slowdown in 2022
      • Figure 9: Average interest rate for UK MFI new advances to PNFCs, February in 2018-22 (% not seasonally adjusted)
    • Credit availability and demand rose for large businesses but remained subdued for SMEs in 2021
      • Figure 10: Availability of corporate credit to PNFCs in the past three months, by business size, Q1 2018-Q1 2022 (net percentage balance)
      • Figure 11: Demand for corporate credit by PNFCs in the past three months, by business size, Q1 2018-Q1 2022 (net percentage balance)
  6. Commercial Banking Market Forecast

    • The five-year outlook for commercial banking and finance
      • Figure 12: Five-year outlook for commercial banking and finance, 2022-26
    • Overview
    • NFC deposits expected to grow by a cumulative 21% to 2026 as UK business climate remains uncertain
      • Figure 13: Market size and forecast of the commercial banking and finance market, in UK MFI Sterling deposits from UK-resident non-financial corporations, 2016-26 (£ billion at 2021 prices)
      • Figure 14: Market size and forecast of the commercial banking and finance market, 2021-26 (£ billion and % annual change)
  7. The Impact of the Economy

    • UK economy reaches pre-pandemic level in 2021 but Omicron and the Ukraine conflict have dampened growth in Q1 2022
      • Figure 15: Annual GDP growth rate, 2017-21 (% annual change)
    • Bank Rate rises for the third time in quick succession as inflationary pressures mount
      • Figure 16: Bank Rate, 2008-22, by date of adjustment (%)
  8. Market Trends

    • A steep decline in the number of business current account switches but opportunities remain
    • Business confidence falls from decade-high level but remained high in Q1 2022
      • Figure 17: Business Confidence Index, per half-year, Q2 2011-Q4 2021 (index figure)
    • Write-offs on loans to PNFCs rose by 22% in 2021 and likely to rise again
      • Figure 18: Write-offs of loans to PNFCs from banks and building societies, 2017-21 (£ million, not seasonally adjusted)
    • Over half of SMEs are using external finance whilst half have also changed their business savings habits
  9. Market Drivers

    • Banks and businesses continue to adapt to the new post-Brexit operating environment
    • UK’s financial position in the EU
    • Job relocations as a result of Brexit
    • Large corporates account for 48% of all private sector turnover…
      • Figure 19: Business population in the UK, private sector, by company size, 2017-21 (number, £ billion, and millions employed)
    • …but over a quarter of businesses report a fall in turnover compared with normal expectations
      • Figure 20: Finance performance of UK businesses, July 2020-March 2022 (% of respondents)
    • Private sector profitability stabilises but business investment faces challenges
    • Profitability
      • Figure 21: UK PNFCs’ average net rate of return, 2017-21 (%)
    • Business investment
      • Figure 22: UK total business investment, chained volume measures and not seasonally adjusted, 2017-21 (£ billion)
    • Company insolvencies rise as government support schemes end and debt repayments close in
      • Figure 23: Company insolvencies in England and Wales, 2017-21 (number)
    • Both inward and outward M&A deals rise in 2021
      • Figure 24: Mergers and acquisitions of UK companies, 2017-21 (number of companies)
  10. Industry Structure

    • Industry development
    • The pandemic has opened up new opportunities for challenger banks but the big banks have started to react to the threat for market share
    • First stage of disruption
    • Pandemic offers new entry points
    • RBS funds help boost market presence
    • The number of banks and building societies hits three-year high in 2021
      • Figure 25: Number of banks and building societies operating in the UK, 2017-21 (number)
    • Starling Bank provides best overall service quality as well as online and mobile services to SMEs
    • ESG considerations move up banks’ agendas
  11. Competitive Strategies

    • Virgin Money launches new current account, sustainability app, and expands fintech partnerships
    • Santander rolls out new cashflow management app
    • Lloyds Bank partners with Satago to re-invent its invoice financing offering
    • NatWest Group launches ‘Green Loans’ and ‘Green Asset Finance’ to help businesses achieve their sustainability targets
    • Aldermore Bank and Cashplus Bank partner to offer a business savings solution for SMEs
    • Barclays partners with global corporate venture builder to drive fintech innovation
    • Allica Bank pledges to make over £1 billion in committed lending offers in 2022
  12. Company Profiles

    • Aldermore Bank
    • Recent company activity
    • Financial information
      • Figure 26: Financial analysis of Aldermore Bank plc, 2016-21 (£ million)
    • Barclays Bank PLC
    • Recent company activity
    • Financial information
      • Figure 27: Financial analysis of Barclays PLC, 2017-21 (£ million)
    • Co-operative Bank
    • Recent company activity
    • Financial information
      • Figure 28: Financial analysis of Co-operative Bank plc, 2017-21 (£ million)
    • HSBC Bank plc
    • Recent company activity
    • Financial information
      • Figure 29: Financial analysis of HSBC Bank, 2017-21 (£ million)
    • Lloyds Banking Group
    • Recent company activity
    • Financial information
      • Figure 30: Financial analysis of Lloyds Banking Group, 2017-21 (£ million)
    • NatWest Group plc
    • Recent company activity
    • Financial information
      • Figure 31: Financial analysis of NatWest Group, 2017-21 (£ million)
    • Santander UK plc
    • Recent company activity
    • Financial information
      • Figure 32: Financial analysis of Santander UK plc, 2017-21 (£ million)
    • Virgin Money UK
    • Recent company activity
    • Financial information
      • Figure 33: Financial analysis of Virgin Money UK plc, 2018-21 (£ million)
  13. Appendix – Data Sources, Abbreviations and Supporting Information

    • Abbreviations
    • Methodology
  14. Further Sources and Contacts

    • Trade associations
    • Trade magazines
    • Trade exhibitions

About the report

This market report provides in-depth analysis and insight supported by a range of data. At the same time, introductory and top-level content is provided to give you an overview of the issues covered.

Market

Mintel provides a range of market information, frequently through the category level, including market size and forecasting, complete with market drivers that illustrate the forces that shape a category or market.

Consumer

Mintel’s proprietary consumer research provides our analysts with the attitudinal and behavioral data used to provide valuable insight to topical issues.

Brand/Company

Mintel provides overviews of the top brands and manufacturers, and uses consumer research to explore attitudes and reactions to brands, as well as insight into what will resonate with consumers.

Data

Market reports provide appendices of data to support the research and insight produced. Our databooks* are easily manipulated and downloadable to support your research needs and covers factors from consumer attitudes to market forecasts.

*databooks not available with UK B2B Industry reports.

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