2020
9
UK Small Business Banking Market Report 2020
2020-11-12T03:04:16+00:00
OX989918
2195
127334
[{"name":"Banking and Payments","url":"https:\/\/store.mintel.com\/industries\/finance\/financial-services\/banking-payments"}]
Report
en_GB
"Despite the enormous threats posed by it, COVID-19 also offers a unique opportunity to highlight the importance of specialist small business banking products, such as accessing finance and support. Banks’…

UK Small Business Banking Market Report 2020

£ 2,195 (Excl.Tax)

Report Summary

Everything you need to make the right decisions

Providing the most comprehensive and up-to-date information and analysis of the Small Business Banking – UK market including the behaviours, preferences and habits of the consumer.

Mintel has the answers you’re looking for

What are the key challenges facing the industry? Who is the consumer and what do they want? Where are the opportunities, where are the risks and what lies ahead?

Covered in this report

Despite the heavy blow to the economy and the labour market caused by COVID-19, it is expected that, once the country starts to recover, self-employment will return to growth. This is something that happened during the last recession. As the nature of jobs and incomes adapts to the next normal, small business banking providers should cater to the unique and changing challenges faced by different types of businesses, for example in terms of flexible pricing structures.

Expert analysis from a specialist in the field

Written by Irene Salazar, a leading analyst in the Financial Services sector, her extensive knowledge delivers in-depth commentary and analysis to highlight current trends and add expert context to the numbers.

Despite the enormous threats posed by it, COVID-19 also offers a unique opportunity to highlight the importance of specialist small business banking products, such as accessing finance and support. Banks’ response to the crisis has been welcomed by small business owners, with established providers particularly standing to gain in terms of customer perceptions.
Irene Salazar
Senior Financial Services Analyst

Table of Contents

  1. Overview

      • Key issues covered in this report
        • COVID-19: Market context
          • Economic and other assumptions
            • Products covered in this Report
            • Executive Summary

                • Impact of COVID-19 on small business banking
                  • Figure 1: Short-, medium- and long-term impact of COVID-19 on small business banking, 19 October 2020
                • The market
                  • Market size and forecast
                    • Figure 2: Forecast of the volume of small business banking current accounts, 2015-25
                  • Unprecedented levels of state intervention to protect the economy
                    • Government-backed loans for SMEs surpass £53 billion
                      • Figure 3: Volume of applications and amounts approved under the BBLS and CBILS, 4 May – 20 September 2020
                    • Companies and brands
                      • ‘Big Five’ account for 81% of accounts used for businesses
                        • Figure 4: Main business current account provider, July 2020
                      • Banks have been key in supporting the nation and keeping things running…
                        • … but face a significant threat to profits
                          • Adspend remained fairly constant during initial lockdown
                            • Figure 5: Total above-the-line, online display and direct mail advertising expenditure on business banking products and brand building, by category, 2015/16-2019/20
                          • The consumer
                            • A third of small businesses are in a precarious situation
                              • Figure 6: Current financial situation of the business, June 2019 and July 2020
                            • 43% use a regular current account for their business
                              • Figure 7: Type of bank account used to manage business finances, 2017-20
                            • 88% of those with dedicated accounts have other business banking products
                              • Figure 8: Ownership of other business banking products, July 2020
                            • Digital channels gain ground at the expense of in-branch services
                              • Figure 9: Channel preference in small business banking, by activity, July 2020
                            • Price is the most important driver
                              • Figure 10: Purchase drivers in small business banking, July 2020
                            • 44% of small businesses would prefer pay-as-you-go banking
                              • Figure 11: Fees and charges preferences, July 2020
                            • COVID-19 has resulted in a more conscious approach to business finances…
                              • Figure 12: Actions taken in response to COVID-19, July 2020
                            • .. and has had a positive impact on banks’ reputations
                              • Figure 13: Impact of COVID-19 on attitudes towards small business banking, July 2020
                            • There’s room for trusted third parties to continue disrupting
                              • Figure 14: Attitudes towards small business banking, July 2020
                          • Issues and Insights

                            • COVID-19 provides an unprecedented opportunity to highlight the value of having a business bank account
                              • Traditional providers’ reputations stand to gain from their role in the crisis…
                                • …but navigating the recovery will be difficult
                                • The Market – Key Takeaways

                                  • COVID-19 boosts demand for specialist business bank accounts
                                    • Self-employment falls but is expected to recover
                                      • UK government is doing ‘whatever it takes’ to support the economy
                                        • BBLS and CBILS save SMEs but will distort lending for up to a decade
                                        • Market Size and Forecast

                                          • Impact of COVID-19 on small business banking
                                            • Figure 15: Short-, medium- and long-term impact of COVID-19 on small business banking, 19 October 2020
                                          • Number of small business current accounts fell in 2018 and 2019
                                            • Figure 16: Volume of small business current accounts, in credit and overdrawn, 2015-19
                                          • Total balances held in small business accounts continues to grow
                                            • Figure 17: Volume and value of small business current and savings accounts, 2015-19
                                          • COVID-19 to prompt growth in small business bank accounts
                                            • Figure 18: Forecast of the volume of small business banking current accounts, 2015-25
                                            • Figure 19: Forecast of the volume of small business banking current accounts, index and annual change, 2015-25
                                          • Market drivers and assumptions
                                            • Figure 20: Key drivers affecting Mintel’s market forecast, 2015-24 (prepared on 20 October 2020)
                                          • Learnings from the last recession
                                            • Figure 21: Number of small business current accounts, 2005-14
                                          • Forecast methodology
                                          • Small Business Lending

                                            • Bounce Back loans worth £38 billion approved…
                                              • Figure 22: Volume of applications and amounts approved under the Bounce Back Loan Scheme (BBLS) 4 May – 20 September 2020
                                            • …with an additional £15.45 billion borrowed under the CBILS
                                              • Figure 23: Volume of applications and amounts approved under the Coronavirus Business Interruption Loan Scheme (CBILS) 4 May – 20 September 2020
                                            • Pre-COVID-19, the value of small business lending had fallen…
                                              • Figure 24: Annual value of gross loans advanced and overdraft facilities approved for small businesses, 2015-19
                                            • …as well as the volume of facilities approved
                                              • Figure 25: Annual number of loans and overdraft facilities approved for small businesses, 2015-19
                                          • Market Drivers

                                            • COVID-19 deals a heavy blow to the economy…
                                              • Figure 26: GDP growth, annual change, 2015-24 (central forecast)
                                            • …with unemployment set to more than double in 2020
                                              • Figure 27: Unemployment rate, 2015-24 (central forecast)
                                            • Self-employment falls in Q2 2020, but is expected to recover
                                              • Figure 28: Number of self-employed workers in the UK, 2000 Q1 2000 – Q2 2020
                                            • Brexit: lack of clarity regarding trading relationship with the EU as deadline nears
                                              • Small businesses account for over 99% of total business population…
                                                • Figure 29: UK business population, by business size, 2015-20
                                              • …and 35% of total turnover
                                                • Figure 30: Share of UK private sector turnover, by size of business, 2015-20
                                            • Regulatory and Legislative Changes

                                              • UK government takes unprecedented steps to support businesses
                                                • Government-backed business loan schemes
                                                  • Bounce Back Loan Scheme
                                                    • Coronavirus Business Interruption Loan Scheme
                                                      • The Coronavirus Job Retention Scheme (CJRS) and the new Job Support Scheme
                                                        • Self-employment Income Support Scheme (SEISS)
                                                          • VAT cut and the New Payment Scheme
                                                            • FOS powers expanded in response to COVID-19
                                                            • Companies and Brands – Key Takeaways

                                                              • Significant threat to profits will force unpopular decisions
                                                                • Dominance of ‘Big Five’ likely to continue
                                                                  • Advertising to focus on reassurance in the recovery phase
                                                                  • Market Share

                                                                    • Barclays is the largest individual provider
                                                                      • Figure 31: Main business current account provider, July 2020
                                                                    • ‘Big Five’ account for 81% of accounts used for businesses
                                                                    • Competitive Strategies

                                                                      • Banks have been key in supporting the nation and keeping things running
                                                                        • Significant threat to profits
                                                                          • Bad debts are expected to soar
                                                                            • Small business lending will change over the next decade
                                                                              • Unpopular decisions on the horizon
                                                                                • BCR’s scheme to increase competition faces hurdles
                                                                                  • Nationwide abandons plans to enter the business banking market…
                                                                                    • …and follows Metro Bank in returning BCR money…
                                                                                      • … which has been redistributed
                                                                                      • Launch Activity and Innovation

                                                                                        • Monzo enters the small business current account market
                                                                                          • Partnerships with accounting and third-party services
                                                                                            • Banks enhance digital capabilities and online journeys
                                                                                            • Advertising and Marketing Activity

                                                                                              • Adspend remained fairly constant during lockdown…
                                                                                                • Figure 32: Total above-the-line, online display and direct mail advertising expenditure on business banking products and brand building, 2015/16-2019/20
                                                                                              • …while brands focus on brand building over specific products
                                                                                                • Figure 33: Total above-the-line, online display and direct mail advertising expenditure on business banking products and brand building, by category, 2015/16-2019/20
                                                                                              • Largest spenders account for 81% of adspend
                                                                                                • Starling Bank climbs to the second place
                                                                                                  • Figure 34: Top 10 spenders on above-the-line, online display and direct mail advertising expenditure on business current accounts, credit cards, insurance, finance and loans and business brand building, by advertiser, 2019/20
                                                                                                • Adspend is split between TV, digital and radio
                                                                                                  • Figure 35: Total above-the-line, online display and direct mail advertising expenditure on business current accounts, credit cards, insurance, finance and loans and business brand building, by media type, 2019/20
                                                                                                • Advertising and marketing in the recovery phase
                                                                                                  • Nielsen Ad Intel coverage
                                                                                                  • The Consumer – Key Takeaways

                                                                                                    • COVID-19 highlights the importance of formal banking products
                                                                                                      • Small businesses will be price and value sensitive
                                                                                                        • Despite an accelerated shift towards digital channels, branches remain important
                                                                                                          • An opportunity for banks to improve their reputation
                                                                                                            • Traditional and established providers stand to gain, while FinTechs are at risk
                                                                                                            • Small Business Sentiment

                                                                                                              • A third of small businesses are in a precarious situation
                                                                                                                • Figure 36: Current financial situation of the business, 2017-2020
                                                                                                              • A renewed negativity towards the impact of Brexit
                                                                                                              • Business Bank Account Ownership and Tenure

                                                                                                                • 43% use a regular current account for their business…
                                                                                                                  • Figure 37: Type of bank account used to manage business finances, July 2020
                                                                                                                • …and proportion of owners using personal accounts has grown
                                                                                                                  • Figure 38: Type of bank account used to manage business finances, 2017-2020
                                                                                                                • 61% have been with their provider longer than five years
                                                                                                                  • Figure 39: Business bank account tenure, July 2020
                                                                                                              • Business Product Ownership

                                                                                                                • 88% of those with dedicated accounts have other business banking products…
                                                                                                                  • Figure 40: Ownership of other business banking products, July 2020
                                                                                                                • …and half have three or more
                                                                                                                  • Figure 41: Repertoire of other business banking products owned, July 2020
                                                                                                              • Channel Preferences

                                                                                                                • Digital channels gain ground
                                                                                                                  • Figure 42: Channel preference in small business banking, by activity, July 2020
                                                                                                                • Appeal of mobile banking remains limited
                                                                                                                  • Figure 43: Channel preference in small business banking, by activity, June 2019 and July 2020
                                                                                                                • Preference for branches falls
                                                                                                                  • Figure 44: Channel preference in small business banking, by activity, June 2019 and July 2020
                                                                                                              • Purchase Drivers

                                                                                                                • Price is the most important driver
                                                                                                                  • Figure 45: Purchase drivers in small business banking, July 2020
                                                                                                                • Branches have an important role to play
                                                                                                                  • Traditional providers have an edge
                                                                                                                  • Fees and Charges Preferences

                                                                                                                    • A higher proportion of small businesses would prefer pay-as-you-go banking…
                                                                                                                      • Figure 46: Fees and charges preferences, July 2020
                                                                                                                    • …but there is room for competition
                                                                                                                      • Figure 47: Fees and charges preferences, by number of employees, July 2020
                                                                                                                  • Impact of COVID-19 on Behaviours

                                                                                                                    • A more conscious approach to business finances
                                                                                                                      • Figure 48: Actions taken in response to COVID-19, July 2020
                                                                                                                    • Smaller businesses less likely to take action
                                                                                                                      • Figure 49: Repertoire of actions taken in response to COVID-19, by number of employees, July 2020
                                                                                                                  • Impact of COVID-19 on Attitudes

                                                                                                                    • A positive impact on banks’ reputations…
                                                                                                                      • …which will be put to the test during the downturn and the recovery
                                                                                                                        • Figure 50: Impact of COVID-19 on attitudes towards small business banking, July 2020
                                                                                                                      • Traditional and established providers stand to gain…
                                                                                                                        • …particularly when it comes to micro-businesses
                                                                                                                        • Attitudes towards Small Business Banking

                                                                                                                          • Opportunities for banks to leverage their reputation
                                                                                                                            • Figure 51: Attitudes towards small business banking, July 2020
                                                                                                                          • Room for trusted third parties to offer additional services
                                                                                                                          • Appendix – Data Sources, Abbreviations and Supporting Information

                                                                                                                              • Abbreviations
                                                                                                                                • Consumer research methodology

                                                                                                                                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.

                                                                                                                                Below is a sample report, understand what you are buying.

                                                                                                                                Click to show report
                                                                                                                                2024 Sample Consumer Cover

                                                                                                                                Please Note: This is a sample report. All of the figures, graphs, and tables have been redacted. Our reports are available to download in PDF and PPT formats.

                                                                                                                                Trusted by companies. Big and small.

                                                                                                                                Want to speak to us directly?

                                                                                                                                Contact us with your enquiry and our expert global team can help.

                                                                                                                                Get in touch