Unsecured Loans to Business in the UK - Key Trends and Opportunities to 2019

Synopsis

The main theme throughout the review period was new lending recovering and growing substantially in the latter years - 13.4% thought 2014 - but the outstanding stock of business lending continued to fall due even sharper growth in repayments, which reached 15.3% in 2014 from 2013..

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Executive summary

Net lending to small and medium-sized businesses was positive during four of the six months to March 2015, increasing by 1% from December 2014, while net lending to large businesses increased almost by 2% during the three months to March 2015. Gross lending to all businesses has registered growth since the start of 2013, mainly due to an increase in the availability of credit. Outstanding lending declined during 2014, despite increased gross lending, due to a substantial growth in repayments: 15%, 13% and 22% for small, medium-sized and large business respectively.

Interest rates remain at a historic low, and have been falling consistently since the Bank of England cut the central bank rate to 0.5% in 2009. The Bank for England’s quarterly Credit Conditions survey found that lending rates to small businesses remained broadly unchanged during the first quarter of 2015, while respondents indicated that rates had fallen significantly for medium-sized and large businesses.

The government has made several attempts to reinvigorate business lending over the last couple of years, however its projects have failed to have the desired effect. The flagship Funding for Lending scheme (FLS) began slowly and fell short of its initial GBP80 billion target by GBP20 billion in 2012. However, improvements have been made seen since 2014, and a substantial increase in the money lent through the FLS directly led to both outstanding stock for small and medium enterprises (SMEs) and new term lending to large business increasing. Project Merlin – the Government’s agreement with the ‘big four’ banks to increase lending to small businesses – fell GBP1.1 billion shy of its initial target.

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The rise of the emergency 0.5% bank rate is set to make access to credit more expensive for banks, and subsequently, for businesses. With banks already wary of lending to smaller businesses, this may result in a decline in loan approvals, while businesses themselves are likely to be deterred by the prospect of more expensive loans. The Office for Budget Responsibility (OBR) altered its forecast in March 2015 and anticipates the rise to occur in mid-2016, as opposed to later this year. This gives banks and businesses extra time to prepare for the additional costs while the economy grows.

The industry is dominated by mainstream banks, with the ‘big four’ of Royal Bank of Scotland, Lloyds, Barclays and HSBC controlling over 80% of the market. Regulations and high costs make it a difficult industry to enter. Therefore, any real competition is sparse, although peer-to-peer lending has risen sharply over the last few years – it almost doubled in 2013 – after offering smaller businesses a viable alternative if bank loans are unavailable or too expensive.

Scope
This report provides market analysis, information and insights into the UK business lending industry.
It provides a breakdown of the types of business loans in the UK.
It analyses drivers and the outlook for the market .
It provides information on the main banks in the UK market.
It covers news and regulatory developments.
Reasons to buy
Gain an understanding of the UK business lending industry
Access monthly and annual statistics on every aspect of the market, both in written form and in graphs and tables.
Read analysis of the relevant market statistics, detailing what has been happening in the lending to business market for both SMEs and large businesses, why it has been happening, and what to expect in the coming years.
Read about the economic factors impacting the market.
Read about how individual banks and building societies are affecting the market, in terms of market share and innovation.
Key highlights

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The stock of lending to businesses suffered greatly during the financial crash and has been in constant decline since. Strong growth in repayments, due to companies' increased fear of debt has been the main factor, but improving economic conditions make growth likely over the forecast period.

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