2022
9
UK Commercial Borrowing Market Report 2022
2023-01-17T03:04:43+00:00
OX1101345
1495
159540
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Report
en_GB
“The current economic situation will mean that lenders will be more selective when undertaking borrowing agreements. Lenders are likely going to focus on profitable areas, meaning financial institutions need to…

UK Commercial Borrowing Market Report 2022

£ 1,495 (Excl.Tax)

Description

 

The current economic situation will mean that lenders will be more selective when undertaking borrowing agreements. Lenders are likely going to focus on profitable areas, meaning financial institutions need to identify the sectors they would like to target and focus on meeting the finance needs in these. However, they must keep in mind that these sectors will also experience changes over the coming years and that there will be new opportunities to be had.”

Lewis Cone - Research Analyst

Lewis Cone
Senior B2B Analyst

Table of Contents

  1. Overview

    • Key issues covered in this Report
    • Products covered in this Report
  2. Executive Summary

    • Five-year outlook for commercial borrowing
      • Figure 1: Five-year outlook for commercial borrowing, 2023-27
    • The market
    • Net lending likely to remain positive in 2022 and surpass levels seen in 2021
      • Figure 2: UK MFIs’ net loans to non-financial businesses, Q2 2021 – Q3 2022, (£ million, NSA)
    • Outstanding loan amounts on an upward trend since Q3 2022
      • Figure 3: UK total loan amounts outstanding to MFIs from non-financial businesses, May-October 2022, (£ million, not seasonally adjusted)
    • Write-offs on loans to NFCs rose in 2021 but likely to fall in 2022
      • Figure 4: Write-offs of loans to PNFCs from banks and building societies, 2017-22*, (£ million, not seasonally adjusted)
    • Gross lending expected to fall by an average of 0.3% between 2023 and 2027
      • Figure 5: Forecast UK MFIs’ gross lending to non-financial businesses, 2023-27, (£ million, not seasonally adjusted)
  3. Issues and Insights

    • SME loan accessibility and availability remains a problem
    • COVID support loans may have been provided to those not facing financial distress
  4. Market Size

    • Overview
    • Business debt
    • Loan affordability
    • Alternative lenders
    • Net lending likely to have remained positive in 2022 and surpass levels seen in 2021
      • Figure 6: UK MFIs’ net loans to non-financial businesses, Q3 2020-Q3 2022, by size of business (£ million, not seasonally adjusted)
    • Outstanding loan amounts remain largely stable but remain above pandemic levels
      • Figure 7: UK total loan amounts outstanding to MFIs from non-financial businesses, November 2020-October 2022, by size of business (£ million, not seasonally adjusted)
      • Figure 8: M4 loan amounts outstanding from PNFCs, November 2020-October 2022, (£ million, not seasonally adjusted)
  5. Market Segmentation

      • Figure 9: UK total loan amounts outstanding to SMEs, by industrial sector, October 2022, (£ billion, not seasonally adjusted)
      • Figure 10: UK total loan amounts outstanding to large businesses, by industrial sector, October 2022, (£ billion, not seasonally adjusted)
  6. Further Segmentation

    • Alternative finance
    • P2P business lending
    • Assetz Capital rules P2P business sector, but lends less than it did in 2021
      • Figure 11: Net new lending, by selected P2P lender, January-November 2022, (£ million)
    • Bridging finance
      • Figure 12: UK bridging loans market value, in aggregated loan balances, 2018-22, (£ billion and % annual change)
    • Commercial property (real estate) finance
    • Total outstanding debt falls to three-year low in 2021
      • Figure 13: Aggregated value of outstanding debt in loan books secured on UK commercial property, 2018-22, (£ billion)
    • New lending rose by 48% in 2021 but is likely to have fallen in 2022
      • Figure 14: Gross value of annual loan originations, 2018-22, (£ billion)
    • SME finance
    • SME funding gap
    • Almost a third of SMEs have used credit cards, although a quarter have not used any finance
      • Figure 15: SME lending, by type of finance, 2021, (%)
    • Value of SME loan balances builds on previous year’s growth in 2021
      • Figure 16: Value of SME loans outstanding, by region, 2017-21, (£ million)
  7. Market Forecast

    • Five-year outlook for commercial borrowing
      • Figure 17: Five-year outlook for commercial borrowing, 2023-27
    • Learnings from the last recession
      • Figure 18: Industry performance following the last recession, 2012-16, (£ million)
    • Gross lending expected to fall by an annual average of 0.3% between 2023 and 2027
      • Figure 19: Forecast UK MFIs’ gross lending to non-financial businesses, 2023-27, (£ million, not seasonally Adjusted)
    • Loan write-offs to rise in 2023 and 2024 before subsiding
      • Figure 20: Write-offs of loans to PNFCs from banks and building societies, 2022-26 (£ million, not seasonally adjusted)
  8. The Impact of the Economy

    • Recession fears emerge as growth remains precarious
      • Figure 21: Annual GDP growth rate, 2017-22*, (annual % Change)
    • Bank Rate rises for the eighth time in 2022 as inflationary pressures continue
      • Figure 22: Bank Rate, by date of adjustment, 2008-22, (%)
  9. Market Trends

    • Business confidence remains negative as recession looms
      • Figure 23: Business confidence index, per half-year, Q1 2016-Q4 2022, (index figure)
    • Write-offs on loans to NFCs rose in 2021 but are likely to fall in 2022
      • Figure 24: Write-offs of loans to PNFCs from banks and building societies, 2017-22*, (£ million, not seasonally adjusted)
    • Credit availability and demand fall in Q3 2022 with both expected to remain low in Q4 except in demand from small businesses
      • Figure 25: Availability of corporate credit to PNFCs in the past three months, By business size, Q4 2016-Q3 2022, (net percentage balance)
      • Figure 26: Demand for corporate credit by PNFCs in the past three months, By business size, Q4 2016-Q3 2022, (net percentage balance)
    • Commercial lending rates surge in H2 2022
      • Figure 27: Average interest rate for UK MFI new advances to PNFCs, at October in 2018-22, (% not seasonally adjusted)
    • Major firms working together to drive ‘green’ investment
  10. Market Drivers

    • Banks and businesses continue to adapt to post-Brexit environment whilst financial services still await new regulation
    • UK’s financial position in the EU
    • Job relocations as a result of Brexit
    • Company insolvencies rise as debt repayments grow alongside increasing cost burden
      • Figure 28: Company insolvencies in England and Wales, 2017-22*, (number and % annual change)
    • Commercial property transactions significantly rise in 2021, but hybrid working patterns likely to subdue growth
      • Figure 29: Number of non-residential property transactions, 2017-21, (number, seasonally adjusted)
    • Private sector profitability stabilises but business investment weakens
      • Figure 30: UK PNFCs average annual net rate of return, 2017-21, (% rate of return)
      • Figure 31: UK total business investment, 2017-21, (chained volume measures and not seasonally adjusted, £ billion)
    • Both inward and domestic M&A deals rise in 2021, but have fallen over 2022
      • Figure 32: Mergers and acquisitions of UK companies, 2017-21, (number of companies)
    • Government schemes
    • The COVID-19 business support schemes
    • British Business Bank
    • Business Finance Support Finder
    • Bank of England Stress Test
  11. Industry Structure

    • Industry development
    • Several lenders secure new institutional funding lines
    • Experian launches tool to detect fraudulent credit applications and transactions
    • FCA instructs banks to treat in-debt SMEs fairly
  12. Competitive Strategies

    • NatWest partners with StepChange to offer debt advice
    • Brickflow launches platform to improve the sourcing of loans for development finance
    • Validis and Aryza launch open finance solution to help lenders obtain better quality financial data from borrowers
    • Cambridge & Counties Bank launches VAT loan for commercial properties
  13. Company Profiles

    • Barclays Bank PLC
    • Recent company activity
    • Financial information
      • Figure 33: Financial analysis of Barclays Bank PLC, 2017-21, (£ million)
    • Funding Circle
    • Recent company activity
    • Financial information
      • Figure 34: Financial analysis of Funding Circle, 2017-21, (£ million)
    • HSBC Bank plc
    • Recent company activity
    • Financial information
      • Figure 35: Financial analysis of HSBC Bank, 2017-21, (£ million)
    • Lloyds Banking Group
    • Recent company activity
    • Financial information
      • Figure 36: Financial analysis of Lloyds Banking Group, 2017-21, (£ million)
    • NatWest Group plc
    • Recent company activity
    • Financial information
      • Figure 37: Financial analysis of NatWest Group, 2017-21, (£ million)
    • Santander UK plc
    • Recent company activity
    • Financial information
      • Figure 38: Financial analysis of Santander UK plc, 2017-21, (£ million)
    • Shawbrook Bank
    • Recent company activity
    • Financial Information
      • Figure 39: Financial analysis of Shawbrook Bank, 2017-21, (£ million)
  14. Appendix – Data Sources, Abbreviations and Supporting Information

    • Abbreviations
    • Methodology
  15. Further Sources and Contacts

    • Trade Associations
    • Trade Magazines
    • Trade Exhibitions

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