Timetric predicts positive outlook for granting loans to UK businesses
Lending to UK businesses is set to grow at a fast pace largely backed by an improving economy, finds a new report from Timetric.
According to Timetric, total Net lending to non-financial businesses is forecast to increase every year up until the end of 2019, due to improving economic conditions and an increasing appetite for risk; however, rising interest rates across this period will stunt growth.
New lending to businesses is expected to grow by around £98.6bn from £206bn in 2015 to £304.6bn in 2019. Gross lending has been extremely strong since 2013 and Timetric expect the annual growth rate to remain around the 10% level it attained at that year.
According to Ben Carey-Evans, Analyst at Timetric, said: “The most significant challenge that will affect the lending to business industry in the future is the Bank of England’s imminent rising of the interest rate, which will consequently increase the cost of credit. However, at present people are keen to pay off existing debts while interest rates are low, so repayments may also drop, meaning net lending could remain stable.”
Both small-medium enterprises (SMEs) and large-sized businesses are expected to record steady growth; however, large businesses are better equipped to deal with any rises in interest rates. Timetric forecasts suggest new term lending to these businesses could rise by up to £57.4bn in the next four years, as new lending is expected to value £204.3bn in 2018, up from the £146.7bn projected for 2014.
On the other hand, SMEs – driven by economic recovery and interest rates remaining low – is expected to record growth every year up until the end of 2018, as forecasts suggest there will be around £16.6bn lent to medium-sized businesses in 2018, an increase of just over £1.2bn from the £14.4bn recorded in 2013.
Ben said: “A prominent factor that looks to impact the lending to business industry is the increasing desire to improve competition within the banking sector and subsequently break up the market dominance of the ‘big four’. Lloyds, RBS, HSBC and Barclays hold over 80% of the lending to business market and barriers to entry remain high for any non-established bank. The forced splitting of TSB from Lloyds in September 2013 by the European Commission (EC) was the first major step towards enhanced competition.”