Bank of England Trends in Lending

04/01/2015
Bank of England Trends in Lending

B A N K O F E N G L A N D

 

Trends in Lending

 

October 2014

 

This quarterly publication presents the Bank of England’s assessment of the latest trends in

 

lending to the UK economy.

It draws mainly on long-established official data sources, such

 

as the existing monetary and other financial statistics collected by the Bank that cover all

 

monetary financial institutions, and data collections established since the start of the financial

 

These data are supplemented by discussions between the major UK lenders and Bank staff,

 

giving staff a better understanding of the business developments driving the figures, and this

 

intelligence is reflected in the report.

The major

UK lenders

are Banco Santander,

Barclays,

 

HSBC, Lloyds Banking Group, Nationwide and Royal Bank of Scotland and together they

 

accounted for around 70% of the stock of lending to businesses, 75% of the stock of mortgage

 

lending, and 50% of the stock of consumer credit (excluding student loans) at end-June 2014.

 

The report also draws on intelligence gathered by the Bank’s network of Agents and from

 

market contacts, as well as the results of other surveys including the Bank of England’s

 

Bank Liabilities Survey and Credit Conditions Survey.

The focus of the report is on lending, but

 

broader credit market developments, such as those relating to capital market issuance, are

 

discussed where relevant.

 

The report covers data and intelligence gathered up to end-September 2014. Unless stated

 

otherwise, the data reported cover lending in both sterling and foreign currency, expressed

 

in sterling.

 

See www.bankofengland.co.uk/statistics/Documents/releasecalendar.pdf for future publication dates.

 

(2) For a fuller background, please refer to the first edition of Trends in Lending available at

 

www.bankofengland.co.uk/publications/other/monetary/trendsapril09.pdf.

 

(3) Membership of the group of major UK lenders is based on the provision of credit to UK-resident companies and individuals, regardless

 

of the country of ownership.

 

(4) The Bank Liabilities Survey and the Credit Conditions Survey for 2014 Q3 were conducted between 13 August and 8 September.

 

Contents

 

Executive summary                                                                                                                     3

 

1     Lending to UK businesses and individuals                                                                              4

 

2     Loan pricing                                                                                                                                   7

 

3     Credit supply and demand                                                                                                      10

 

Box An update to estimates of external finance for UK businesses                                             12

 

Glossary and other information                                                                                                     16

 

Executive summary                                                                                                               3

 

Executive summary

 

Over the past six months, the monthly net lending flow to UK businesses has been volatile on a month-to-month basis but, on

 

average, was broadly close to zero. Mortgage approvals by all UK-resident mortgage lenders for house purchase picked up in June,

 

before easing back slightly in August. The average monthly net lending flow by UK-resident mortgage lenders was £2.3 billion

 

in the three months to August, broadly unchanged compared to the previous three months. The annual growth rate in the stock

 

of consumer credit picked up slightly to 6.1% in August.

 

Pricing on lending to small and medium-sized enterprises continued to drift down over the past year, according to some

 

measures. Quoted interest rates on some fixed-rate mortgages at 75% loan to value ratio fell in September. Quoted rates on

 

some personal loans fell by around 80 basis points since the start of the year.

 

Contacts of the Bank’s network of Agents noted that credit conditions had remained easy for large corporates and availability

 

had remained reasonable for many small and medium-sized enterprises. Respondents to the Bank of England’s Credit Conditions

 

Survey expected demand for bank lending from corporates to increase in 2014 Q4, particularly from medium-sized companies.

 

Lenders in the survey reported that the availability and demand for secured credit from households fell significantly in Q3.

 

(1)
(2)
(1)
(2)
Table 1.A Lending to UK businesses (allAverages (a)2014
2010 2011 2012 2013 2014   Q1 2014   Q2 June July Aug.
PNFC all currency net monthly flow(£ billions) -2.1 -0.8 -1.5 -0.7 -1.5 -0.2 -2.3 1.1 -0.1
Three-month annualised growthrate (per cent) -5.2 -2.0 -3.7 -2.7 -2.8 -0.5 -0.6 0.8 -1.4
Twelve-month growth rate (per cent) -7.1 -3.3 -3.1 -3.0 -2.5 -1.8 -1.6 -1.7 -1.2
(a) Loans by UK monetary financial institutions (MFIs) to private non-financial corporations (PNFCs) excluding
the effects of securitisations and loan transfers. Data cover loans in both sterling and foreign currency,
expressed in sterling. Seasonally adjusted.

 

Table 1.B Lending to UK businessesAverages (a)2014
2010 2011 2012 2013 2014   Q1 2014   Q2 June July Aug.
PNFC M4Lx net monthly flow(£ billions) -1.4 -1.1 -0.9 -0.2 -2.9 0.7 -5.0 2.8 -1.8
of which:
sterling loans (b) -1.6 -0.5 -1.2 -0.5 -1.7 -0.2 -2.0 -0.2 -0.2
Three-month annualised growthrate (per cent) -3.5 -2.3 -2.9 -1.0 -4.7 1.4 2.1 3.1 -4.1
Twelve-month growth rate (per cent) -3.6 -2.1 -3.2 -2.1 -2.0 -0.4 0.0 0.0 -0.6
(a) Sterling M4 lending by UK MFIs to PNFCs excluding the effects of securitisations and loan transfers. Data
cover loans and MFIs’ holdings of securities.       Seasonally adjusted.
(b) This measure includes loans and MFIs’ holdings of bills and acceptances and excludes commercial paper.
Seasonally adjusted.

 

4                                                                                                                                                             Trends in Lending October 2014

 

1  Lending to UK businesses and

 

individuals

 

Over the past six months, the monthly net lending flow to UK businesses has been volatile on a

 

month-to-month basis but, on average, was broadly close to zero. Mortgage approvals by all

 

UK-resident mortgage lenders for house purchase picked up in June, before easing back slightly

 

in August. The average monthly net lending flow by UK-resident mortgage lenders was £2.3 billion

 

in the three months to August, broadly unchanged compared to the previous three months. The

 

annual growth rate in the stock of consumer credit picked up slightly to 6.1% in August.

 

currency lending)

This section presents a summary of the recent data on lending

to UK businesses and individuals. The twelve-month growth

 

rate in the stock of loans to UK-resident households and

 

businesses was broadly unchanged at around 1.7% over the

 

three months to August.

 

Lending to UK businesses

 

Data covering lending by all UK-resident banks and building

 

societies indicated that over the past six months, the monthly

 

net lending flow to UK businesses has been volatile on a

 

month-to-month basis but, on average, was broadly close to

 

zero. This was in both the all currency loans measure and the

 

sterling lending measure (PNFC M4Lx), consisting of sterling

 

loans — included in the all currency measure — and MFIs’

 

holdings of securities.

A large part of the movement in

 

(M4Lx measure)

PNFCs’ M4Lx reflected changes in MFIs’ holdings of securities

 

issued by PNFCs.

 

The twelve-month rate of growth in these measures of the

 

stock of lending to PNFCs was negative in August though less

 

so than at the start of the year (Tables 1.A and 1.B). Similarly,

 

the rate of contraction in the aggregate stock of lending to

 

UK non-financial businesses also eased over this period

 

(Chart 1.1).

 

Much of the weakness in lending to businesses reflects a

 

contraction in lending to the real estate sector (Chart 1.1),

 

which accounts for around 30% of the stock of loans.

 

In recent months, this was partly offset by positive

 

contributions to the aggregate growth rate in the stock of

 

lending from industrial sectors other than the real estate

 

sector. These include the distribution, professional and other

 

services, and manufacturing sectors.

 

For further details on the definitions of these measures of lending to UK businesses

 

see Bankstats (Monetary and Financial Statistics), August 2014, ‘Measures of lending to

 

UK businesses’, available at

 

www.bankofengland.co.uk/statistics/Documents/ms/articles/art1sep14.pdf.

 

For more details see the box on ‘Trends in lending and capital market issuance, by

 

major industrial sector’ in July 2014 Trends in Lending, available at

 

www.bankofengland.co.uk/publications/Documents/other/monetary/trendsjuly14.pdf.

 

(1)
Data from participants in the Funding for Lending Scheme
(FLS) Extension showed that their net lending to all businesses
was -£3.9 billion in 2014 Q2. The fall was concentrated in
lending to large companies; net lending to small and
medium-sized enterprises (SMEs) was slightly negative, but at
-£0.4 billion was less negative than in previous quarters.
Gross lending by all UK MFIs to UK non-financial businesses
increased by 21% in the twelve months to August, compared
to the previous period. Repayments by businesses also
increased, though by less, and remained higher than gross
lending. Contacts of the Bank’s network of Agents continued
to report that many SMEs preferred to repay debt.       The annual
rate of growth in the stock of lending remained negative
across business sizes.
Larger companies have access to more bank lending sources
than smaller businesses, such as the syndicated lending
market. The total value of new syndicated lending facilities
granted in the UK market by UK-resident and non-resident
lenders in 2014 Q3 was the largest since 2007 Q3 and over
60% higher than the average of the past four quarters
(Chart 1.2).       There were two large deals in July, which
accounted for around a third of the 2014 Q3 volume,
according to Dealogic data. Around half the value of the
syndicated lending facilities granted in the UK market in 2014
to date was denominated in sterling, similar to 2013.
Capital markets, such as bond and equity markets, provide an
alternative source of external finance for larger companies.
Net bond issuance was £5.1 billion in July — the highest since
February 2013 — partly accounted for by issuance by
UK corporations in the wholesale and retail trade sector.
Overall, net finance raised by UK businesses from UK MFIs
and capital markets was positive in the first two months of
2014 Q3, with positive net bank lending (Table 1.A) and
capital market issuance. (2)
In addition to capital markets, alternative types of funding for
businesses include asset-based finance, leasing and hire
purchase and peer-to-peer lending/crowdfunding.       The box on
pages 12–15 provides an update to estimates of external
finance for UK businesses for 2013 and 2014 to date.
Secured lending to individuals
Mortgage approvals by all UK-resident mortgage lenders for
house purchase picked up in June, before easing back slightly
in August (Chart 1.3).       The number of approvals for
remortgaging was broadly unchanged between June and
(1)(2) Net lending in the FLS Extension includes lending related to non-bank creditproviders. For more details see ‘Funding for Lending Scheme Extension — Usage and

lending data’, available at www.bankofengland.co.uk/markets/Pages/FLS/extension

data.aspx. Non seasonally adjusted.

For more details see Table L and Chart 10 of the August 2014 Money and Credit

statistical release, available at

www.bankofengland.co.uk/statistics/Documents/mc/2014/aug/moneyandcredit.pdf.

 

25
20
15
10
5
0
5
10
15
20
25
Real estate
(b)
2008
09
10
11
12
13
14
+
businesses
affected.
(a)
0
5
10
15
20
25
30
35
40
45
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
£ billions
2008
09
10
11
12
13
14
adjusted.
(a)
0
20
40
60
80
100
120
140
2008
09
10
11
12
13
14
Remortgaging
Other
Thousands
(a)

Section 1 Lending to UK businesses and individuals                                                       5

 

Chart 1.1

Lending to the UK real estate sector and

 

other businesses

 

Percentage changes on a year earlier

 

Other businesses

 

All non-financial

 

(a) Lending by UK MFIs. Rates of growth in the stock of lending. Non seasonally adjusted. For

 

details on the series included in the swathes see tab ‘Chart 1.1 appendix’, available at

 

www.bankofengland.co.uk/publications/Documents/other/monetary/lendingtoukbusinesses

 

andindividualsoctober2014.xls.

 

(b) From January 2011, data are on the SIC 2007 basis. Changes in the SIC codes have led to

 

some components moving between industries. As a result, growth rates in 2011 may be

 

Chart 1.2

Estimates of new syndicated lending facilities

 

granted to UK businesses

 

Sources: Dealogic and Bank calculations.

 

(a) Defined broadly as PNFCs. New syndicated lending facilities excluding cancelled or

 

withdrawn facilities by UK-resident and non-resident lenders. Data are quarterly and cover

 

lending facilities in both sterling and foreign currency, expressed in sterling. Non seasonally

 

Chart 1.3

Approvals of loans secured on dwellings

 

House purchase

 

(a) Data are for monthly number of approvals covering sterling lending by UK MFIs and other

 

lenders to UK individuals. Approvals secured on dwellings are measured net of cancellations.

 

Seasonally adjusted.

 

0
50
100
150
200
250
300
2008
09
10
11
12
13
14
15
£ billions
CML forecast
(c)
(b)
(a)
10
5
0
5
10
2008
09
10
11
12
13
14
Credit cards
+
(a)
Table 1.C Secured lending to individuals (a)2014 Q1 2014   Q2 June 2014July Aug.
Averages
2010 2011 2012 2013
Net monthly flow (£ billions) 0.6 0.8 0.9 0.9 1.8 2.2 2.12.1

1.5

2.32.1

1.6

2.32.1

1.7

Three-month annualised growthrate (per cent) 0.7 0.8 0.8 0.8 1.5 2.0
Twelve-month growth rate (per cent) 0.9 0.7 0.9 0.7 1.0 1.4
(a) Sterling lending by UK MFIs and other lenders to UK individuals.       Seasonally adjusted.

 

6                                                                                                                                                             Trends in Lending October 2014

 

Chart 1.4

Gross lending secured on dwellings

August. In recent discussions, most of the major UK lenders

reported that operational issues associated with the

 

Total gross secured lending

implementation of the Mortgage Market Review had pushed

down on approvals over the summer, but had now largely

 

dissipated.

 

Total gross secured lending in the three months to August

 

increased compared to the previous period. In forecasts

 

published in July 2014, the Council of Mortgage Lenders

 

(CML) expected gross secured lending by all UK-resident

 

mortgage lenders in 2014 to be 18% higher than in 2013 and

 

for lending in 2015 to be 6% higher than in 2014 (Chart 1.4).

 

The average monthly net lending flow by UK-resident

 

Sources: CML, Bank of England and Bank calculations.

mortgage lenders was £2.3 billion in the three months to

 

(a) Total gross lending secured on dwellings. Data cover sterling lending by UK MFIs and other

August (Table 1.C), broadly unchanged compared to the

 

lenders to UK individuals. Non seasonally adjusted.

(b) The bar for 2014 comprises the CML forecast for the year with data up to August.

previous three months. The annual rate of growth in the

 

(c) CML forecasts for 2014 and 2015 published in July 2014.

stock of secured lending to individuals rose slightly to 1.7%

 

in August.

 

Consumer credit

 

Total net consumer credit flows (excluding student loans)

 

were £2.7 billion in the three months to August, similar to the

 

flows in the previous period. Within this, the net flow of other

 

unsecured lending was more than double that for credit cards.

 

The annual growth rate in the stock of consumer credit picked

 

up slightly to 6.1% in August (Chart 1.5) though remained

 

below pre-crisis levels. Within this, the annual growth rate in

 

the stock of other unsecured lending continued to increase,

 

reaching 6.8% in August.

 

Chart 1.5

Consumer credit

 

Percentage changes on a year earlier

 

Total consumer credit

 

Other unsecured loans

 

(a) Sterling lending by UK MFIs and other lenders to UK individuals. Consumer credit consists of

 

credit card lending and other unsecured lending (other loans and advances) and excludes

 

student loans. Seasonally adjusted.

 

0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
Jan.
July
Jan.
July
Jan.
July
Jan.
July
Jan.
July
Jan.
July
bond spreads
(b)
retail bonds
(c)
Covered bond
spread
(e)
Five-year CDS
premia
(d)
10
11
12
13
2009
retail bonds
(c)
14
+
(a)

Section 2

Loan pricing                                                                                                         7

 

2  Loan pricing

 

Pricing on lending to small and medium-sized enterprises continued to drift down over the past

 

year, according to some measures. Quoted interest rates on some fixed-rate mortgages at 75%

 

loan to value ratio fell in September. Quoted rates on some personal loans fell by around

 

80 basis points since the start of the year.

 

Chart 2.1 Indicative long-term funding spreads

Percentage points

This section discusses recent developments in loan pricing for

businesses and individuals, based on statistical data, survey

evidence and discussions with the major UK lenders.

 

Senior unsecured

 

The total cost of bank finance to a company or individual can

 

Spread on five-year

Spread on three-year

generally be decomposed into the fees charged by the lender

 

to provide loan facilities, the spread over a given reference rate

 

(such as three-month Libor or Bank Rate) at which loans are

 

offered, and the prevailing level of that reference rate in the

 

financial markets.

 

An indicative measure of the spread over relevant swap rates

 

on longer-term bank wholesale debt, secondary market bond

 

spreads, was on average slightly lower in 2014 Q3 than in the

 

previous quarter (Chart 2.1). The average of the major

 

Sources: Bloomberg, Markit Group Limited, Bank of England and Bank calculations.

UK lenders’ five-year credit default swap premia — a proxy for

 

(a) All data are to 30 September 2014.

the credit risk component of bank funding costs — was also

 

(b) Constant-maturity unweighted average of secondary market spreads to mid-swaps for the

major UK lenders’ five-year euro senior unsecured bonds, where available. Where a five-year

slightly lower. Respondents to the Bank of England’s 2014 Q3

 

bond is unavailable, a proxy has been constructed based on the nearest maturity of bond

available for a given institution. The gap in the time series between 1 December 2009 and

Bank Liabilities Survey reported a fall in spreads on ‘other’

 

11 January 2010 is because no suitable bonds were in issuance in that period.

(c) Spreads for sterling fixed-rate retail bonds over equivalent-maturity swaps. Bond rates are

funding (which includes short and long-term wholesale debt

 

end-month rates and swap rates are monthly averages of daily rates. The bond rates are

weighted averages of rates advertised by the banks and building societies in the

funding) compared to the previous quarter (Chart 2.2).

 

Bank of England’s quoted rate sample, for products meeting the selection criteria (see

 

www.bankofengland.co.uk/statistics/Pages/iadb/notesiadb/household_int.aspx). The series

 

for the five-year bond is not included for May 2010 and August 2011 to April 2013 as fewer

than three institutions in the sample offered products in these periods.

The swap rate, the fixed rate of interest in a swap contract in

 

(d) The data show an unweighted average of the five-year senior CDS premia for the major

UK lenders, which provides an indicator of the spread on euro-denominated long-term

which floating-rate interest payments are exchanged for

 

wholesale bonds.

(e) Constant-maturity unweighted average of secondary market spreads to mid-swaps for the

fixed-rate interest payments, is a key factor in the setting of

 

major UK lenders’ five-year euro-denominated covered bonds, where available. Where a

five-year covered bond is unavailable, a proxy has been constructed based on the nearest

retail and fixed mortgage rates. Two and three-year swap

 

maturity of bond available for a given institution.

rates rose slightly in the first part of 2014 Q3 before falling

 

back in August (Chart 2.3). More generally, swap rates in

 

September were lower than those in July.

 

Spreads over equivalent-maturity swap rates on three-year

 

retail bonds were broadly flat in 2014 Q3 compared to the

 

previous quarter (Chart 2.1). Respondents to the Bank

 

Liabilities Survey reported that overall retail funding spreads

 

fell in 2014 Q3 (Chart 2.2). Looking forward, some major

 

UK lenders expected retail deposit rates to remain at around

 

current levels in the coming months.

 

Corporate loan pricing

 

The spread over relevant reference rates that SMEs face on

 

new borrowing can vary widely, taking into account various

 

0
1
2
3
4
5
6
Jan.
July
Jan.
July
Jan.
July
Jan.
July
Jan.
July
Jan.
July
Medium SMEs
(b)(d)
Smaller SMEs
(b)(c)
Per cent
2009
All SMEs
(b)
Bank Rate
10
12
11
13
PNFC loans
(e)
14
than £1 million.
(a)
(1)
60
50
40
30
20
10
0
10
20
Q4
Q2
Q4
Q2
Q4
Retail spreads
Other spreads
2012
13
14
+
Q4
Q2
Q4
Q2
Q4
2012
13
14
(a)(b)
0
1
2
3
4
Jan.
July
Jan.
July
Jan.
July
Jan.
July
Jan.
July
Jan.
July
Per cent
Two-year
swap rate
Three-year
swap rate
Five-year
swap rate
2009
13
12
11
10
14
(a)
(1)

8                                                                                                                                                             Trends in Lending October 2014

 

Chart 2.2 Bank Liabilities Survey: funding spreads

Net percentage balances

business-specific risk and credit quality factors. As a result

there is no single definitive measure of loan pricing: statistical

 

and survey data can provide broad estimates, but these may

 

not entirely reflect the true cost of credit faced by SMEs.

 

Pricing on lending to SMEs has continued to drift down,

 

according to some measures. Indicative median interest rates

 

(Chart 2.4) and spreads on new variable-rate facilities to all

 

small and medium-sized enterprises fell by around 10 basis

 

points over the past year, according to survey data from the

 

Department for Business, Innovation and Skills (BIS). The

 

Federation of Small Businesses’ Voice of Small Business Index

 

2014 Q3 reported that 45% of firms that were approved a

 

(a) Net percentage balances are calculated by weighting together the responses of those lenders

loan were offered an interest rate of 4% or less, compared to a

 

who answered the question. The bars show the responses over the previous three months.

The diamonds show the expectations over the next three months. Expectations balances

little over 30% of firms a year ago. The Bank’s measure of

 

have been moved forward one quarter. Where the Bank Liabilities Survey and

Credit Conditions Survey are discussed, descriptions of a ‘significant’ change refer to a net

effective rates on new corporate lending for advances of

 

percentage balance greater than 20 in absolute terms, and a ‘slight’ change refers to a net

percentage balance of between 5 and 10 in absolute terms.

£1 million or less — an indicator of pricing on loans to smaller

 

(b) Question: ‘How has the average cost of funding changed?’. A positive balance indicates an

increase in funding spreads.

businesses — fell in the year to August 2014 (Chart 2.4).

 

Chart 2.3

Swap rates at different maturities

Spreads over reference rates on new lending to small

 

businesses remained unchanged in 2014 Q3 according to

 

lenders in the Bank of England’s Credit Conditions Survey

 

(Chart 2.5). Respondents continued to report that for

 

medium-sized firms they had fallen significantly.

 

Pricing on lending to large companies remained

 

favourable, according to survey evidence. The balance of

 

respondents to the Deloitte CFO Survey — which covers large

 

companies — reporting the cost of credit to be ‘cheap’

 

increased slightly in 2014 Q3 to its highest level since the

 

survey began in 2007 Q3. Respondents to the 2014 Q3 Credit

 

Conditions Survey reported that spreads on new lending to

 

Sources: Bloomberg and Bank calculations.

large businesses fell significantly (Chart 2.5). Lenders in the

 

(a) Sterling swap rates. Swap rates are monthly averages of daily data. Data are to

end-September 2014.

survey noted that non-price terms (the average of balances for

 

Chart 2.4 Indicative interest rates on lending to SMEs

maximum credit lines, fees and commissions and loan

covenants) had loosened significantly for these corporates.

 

In recent discussions, the major UK lenders reported that

 

intense competition was leading to further downward pressure

 

on price and non-price terms for large businesses.

 

Looking forward, respondents to the Credit Conditions Survey

 

expected spreads on new business lending in 2014 Q4 to fall

 

significantly for both medium-sized and large companies and

 

£1 million or less

for spreads for small businesses to be unchanged (Chart 2.5).

 

Mortgage pricing

 

The proportion of new mortgage business at fixed rates

 

increased over the past few years from 64% in 2012 to 88%

 

Sources: BIS, Bank of England and Bank calculations.

in 2014 Q2. As more new business secured on dwellings was

 

(a) These indicative rates do not reflect the impact of cashback deals or fees. Data for Bank Rate are

to end-September and for all other series to end-August. Non seasonally adjusted.

undertaken at fixed rates, the share of fixed-rate products in

 

(b) Median by value of SME facilities (new loans, new and renewed overdrafts) priced at margins over

base rates, by four major UK lenders (Barclays, HSBC, Lloyds Banking Group and Royal Bank of

the stock of mortgage lending increased from 29% to 38%

 

Scotland). Data cover lending in both sterling and foreign currency, expressed in sterling.

(c) Smaller SMEs are businesses with annual debit account turnover on the main business account less

over the same period.

 

(d) Medium SMEs are businesses with annual debit account turnover on the main business account

 

between £1 million and £25 million.

(e) Weighted average of new lending to PNFCs of all sizes by UK MFIs for advances less than or equal

to £1 million, an indicator of pricing for small business loans. Data cover lending in sterling. The

For more details see the box on ‘Recent trends in lending to small and medium-sized

enterprises’ in July 2013 Trends in Lending, available at

 

Bank’s effective interest rates series are currently compiled using data from 23 UK MFIs.

www.bankofengland.co.uk/publications/Documents/other/monetary/trendsjuly13.pdf.

 

Chart 2.5
60
40
20
0
20
40
60
Large PNFCs
2011
12
13
14
+
2011
12
13
14
2011
12
13
14
£25 million.
(a)(b)
0
5
10
15
20
25
Credit cards
(b)
Overdrafts
Per cent
Jan.
July
Jan.
July
Jan.
July
Jan.
July
Jan.
July
Jan.
July
2009
10
11
12
13
14
(a)
0
1
2
3
4
5
6
7
8
Jan.
July
Jan.
July
Jan.
July
Jan.
July
Jan.
July
Jan.
July
Standard
variable rate
(b)
Per cent
(c)
2009
10
11
12
13
14
(a)

Section 2

Loan pricing                                                                                                          9

 

Credit Conditions Survey: spreads over

reference rates on lending to corporates by firm size

The Bank’s measure of the effective rate on new mortgages

was broadly unchanged over the three months to August.

 

Net percentage balances

Within this, the effective fixed-rate ticked up.

 

Small businesses

Medium PNFCs

The quoted interest rates on two and five-year fixed-rate

 

mortgages at 75% loan to value (LTV) ratio fell by 9 and

 

15 basis points respectively between end-August and

 

end-September 2014, having been unchanged in the previous

 

month (Chart 2.6). With equivalent maturity swap rates

 

having fallen by a similar amount between July and September

 

(Chart 2.3), spreads on these 75% LTV ratio products were

 

little changed. The quoted interest rate on the two-year 90%

 

LTV ratio product fell by 24 basis points over this period, such

 

that the spread over the two-year swap rate reduced. In

 

recent discussions with the major UK lenders, falling swap

 

(a) See footnote (a) to Chart 2.2. A positive balance indicates that spreads over reference rates

rates and increased competition were both mentioned as

 

have fallen, such that all else being equal it is cheaper for corporates to borrow.

(b) Small businesses are defined as those with annual turnover of less than £1 million;

factors contributing to the decline in some mortgage rates

 

medium-sized corporates are defined as those with annual turnover of between £1 million

and £25 million; and large corporates are defined as those with annual turnover of over

in September.

 

Chart 2.6

Quoted interest rates on fixed-rate and

Quoted interest rates on some floating-rate products, such as

 

floating-rate mortgages

the standard variable (Chart 2.6) and lifetime tracker rates,

 

were broadly unchanged over 2014 Q3. With Bank Rate

 

unchanged, spreads on these floating-rate mortgages were

 

90% loan to value,

two-year fixed

95% loan to value,

two-year fixed

little changed. In some contrast, the two-year 75% variable

rate fell by 31 basis points in September.

 

Consumer credit pricing

 

Quoted rates on some personal loans fell by around

 

80 basis points since the start of the year (Chart 2.7).

 

75% loan to value,

five-year fixed

75% loan to value,

two-year fixed

Respondents to the 2014 Q3 Credit Conditions Survey

expected a slight narrowing in spreads on other unsecured

 

lending in Q4.

 

The quoted rate on credit cards was little changed in 2014 Q3

 

(a) Sterling. The Bank’s quoted interest rates series are currently compiled using data from up

to 23 UK MFIs. End-month rates. Non seasonally adjusted.

(b) This series was not available between March and May 2009 as fewer than three products

were offered in that period.

(c) This series was not available between May 2008 and September 2013 as fewer than

(Chart 2.7). Respondents to the 2014 Q3 Credit Conditions

Survey noted that competition in this market continued to be

centred around the length of balance transfer offers.

 

three products were offered in that period.

 

Chart 2.7 Quoted interest rates on consumer credit

 

Personal loan (£5,000)

 

Personal loan (£10,000)

 

(a) Sterling. The Bank’s quoted interest rates series are currently compiled using data from up

 

to 23 UK MFIs. End-month rates. Non seasonally adjusted.

 

(b) This series does not include 0% introductory offers on credit cards.

 

Chart 3.1
60
40
20
0
20
40
60
2009     10
11
12
13
14
2009     10
11
12
13
14
2009     10
11
12
13
14
Availability
Demand
(b)
(c)
e PNFCs
(c)
+
2009 Q3.
(a)
100
80
60
40
20
0
20
+
40
60
80
100
2009
10
11
12
13
14
2009
10
11
12
13
14
Cost of credit
Availability
of credit
‘Costly’
‘Cheap’
‘Available’
‘Hard to get’
credit
(a)

10                                                                                                                                                           Trends in Lending October 2014

 

3  Credit supply and demand

 

Contacts of the Bank’s network of Agents noted that credit conditions had remained easy for large

 

corporates and availability had remained reasonable for many small and medium-sized enterprises.

 

Respondents to the Bank of England’s Credit Conditions Survey expected demand for bank lending

 

from corporates to increase in 2014 Q4, particularly from medium-sized companies. Lenders in the

 

survey reported that the availability and demand for secured credit from households fell

 

significantly in Q3.

 

Credit Conditions Survey: availability and

demand for credit across firm sizes

The amount of lending and its price depend on the interaction

of demand and supply factors. Disentangling the separate

 

influences of changes in the supply of, and demand for, credit

 

Net percentage balances

is difficult though survey data can help. This section looks at

 

Small businesses

Medium PNFCs     Larg

recent trends in credit supply and demand, drawing on

 

surveys, reports from the Bank’s network of Agents, and

 

discussions with the major UK lenders.

 

Credit conditions for businesses

 

The overall availability of credit to the corporate sector was

 

broadly unchanged in 2014 Q3, according to respondents to

 

the Bank of England’s Credit Conditions Survey. Lenders in the

 

survey reported that credit availability was unchanged for

 

medium-sized companies and large corporates (Chart 3.1).

 

The balance of respondents to the Deloitte CFO Survey

 

(a) See footnote (a) to Chart 2.2 (for this chart lines rather than bars are used to show the

responses over the previous three months) and footnote (b) to Chart 2.5. A positive balance

indicates that more credit is available or an increase in demand.

(b) Questions on small businesses were introduced in 2009 Q4.

(c) Questions on the availability of credit to medium and large PNFCs were introduced in

2014 Q3 — which covers large companies — who reported

that credit was ‘available’ remained close to 80% (Chart 3.2),

the highest since the survey began in 2007 Q3.

 

Chart 3.2

Deloitte CFO Survey: cost and availability of

Credit availability fell slightly for small businesses in 2014 Q3

according to respondents to the Credit Conditions Survey

 

Net percentage balances

(Chart 3.1). The Federation of Small Businesses’ Voice of Small

 

Business Index 2014 Q3 reported that 52% of small firms in

 

the survey found that the availability of credit was ‘poor’ or

 

‘very poor’, down from 75% two years ago, and around half

 

believed that credit was unaffordable.

 

Contacts of the Bank’s Agents noted that credit conditions

 

had remained easy for large corporates. Contacts also

 

reported that availability had remained reasonable for many

 

SMEs, apart from very small firms or for those operating in

 

certain sectors such as housebuilding or hospitality.

 

Lenders in the Credit Conditions Survey reported that demand

 

(a) Net percentage balances for the cost of credit are calculated as the percentage of

respondents reporting that bank credit is ‘costly’ less the percentage reporting that it is

for bank lending from small businesses fell in 2014 Q3

 

‘cheap’. Net percentage balances for the availability of credit are calculated as the

percentage of respondents reporting that credit is ‘available’ less the percentage of

(Chart 3.1). More generally, the proportion of SMEs not

 

respondents reporting that it is ‘hard to get’. A positive balance indicates that a net balance

of respondents report that credit is ‘costly’ or credit is ‘available’.

seeking finance (bank loans, overdrafts) in the previous

 

Credit Conditions Survey: demand for
Chart 3.3
(1)
60
40
20
0
20
+
40
60
2009
10
11
12
13
14
2009
10
11
12
13
14
Secured
(a)
80
60
40
20
0
20
+
40
60
80
2009
10
11
12
13
14
2009
10
11
12
13
14
Remortgaging
(a)
20
10
0
10
20
30
40
50
60
70
14
+
adjusted.
(a)
(1)

Section 3

Credit supply and demand                                                                              11

 

Credit Conditions Survey: availability of

secured credit to households

twelve months was 78% in 2014 Q2 and similar to the previous

quarter, according to the SME Finance Monitor.

 

Net percentage balances

Availability to borrowers with

more than 75% LTV ratio

Respondents to the 2014 Q3 Credit Conditions Survey reported

that demand for bank lending increased significantly from

 

medium-sized companies and also increased from large

 

corporates (Chart 3.1). In recent discussions, most major

 

UK lenders noted that demand for credit from large corporates

 

was largely for refinancing purposes to secure lower rates.

 

Looking forward, lenders in the Credit Conditions Survey

 

expected overall credit availability to remain unchanged in

 

2014 Q4. Respondents to the survey expected demand for

 

bank lending from corporates to increase in Q4, particularly

 

from medium-sized companies.

 

(a) See footnote (a) to Chart 2.2. A positive balance indicates that more credit is available.

Credit conditions for households

 

After eight consecutive quarters of expansion, the availability

 

of secured credit to households fell significantly in the three

 

Chart 3.4

household secured lending

months to early September, according to respondents to the

Credit Conditions Survey (Chart 3.3). Many lenders in the

survey noted that operational issues associated with the

 

House purchase

Net percentage balances

implementation of the Mortgage Market Review had pushed

 

down on credit availability over the summer. Lenders in the

 

survey also reported that credit availability for borrowers with

 

LTV ratios above 75% fell, and they had become less willing to

 

lend at LTV ratios above 90%. Looking ahead, the availability

 

of secured credit was expected to increase over the next

 

three months.

 

Demand for secured lending for house purchase and

 

remortgaging was also reported to have fallen significantly

 

over the past quarter, according to respondents to the Credit

 

Conditions Survey (Chart 3.4). The Royal Institution of Chartered

 

Surveyors’ (RICS) new buyer enquiries balance became negative

 

(a) See footnote (a) to Chart 2.2. A positive balance indicates an increase in demand.

in 2014 Q3, consistent with a fall in demand for house purchase

 

(Chart 3.5). Lenders in the Credit Conditions Survey expected

 

demand for secured credit for house purchase and remortgaging

 

to increase in 2014 Q4 (Chart 3.4). In recent discussions, some

 

Chart 3.5

RICS Residential Market Survey: new buyer

major UK lenders noted that they were particularly uncertain

 

enquiries

about the pace of underlying demand for secured lending.

 

Net percentage balance

 

Respondents to the Credit Conditions Survey indicated that the

 

amount of unsecured credit made available to households

 

increased in 2014 Q3. Lenders expected a further rise in the

 

availability of unsecured credit in 2014 Q4.

 

Demand for credit card lending increased in 2014 Q3, according

 

to respondents to the Credit Conditions Survey. Lenders reported

 

that demand for other unsecured lending products, such as

 

personal loans, was unchanged. Demand for credit card and

 

other unsecured lending was expected to increase significantly

 

over the next three months, according to lenders in the survey.

 

2009   10   11   12   13

 

(a) Net percentage balance for new buyer enquiries is calculated as the proportion of

respondents reporting an increase in enquiries over the previous month, less the proportion

reporting a decrease. A positive balance indicates an increase in enquiries. Seasonally

These SMEs are those that had not had a borrowing event, and also said that nothing

had stopped them from applying for any (future) loan/overdraft funding in the

 

previous twelve months.

 

2014 to date (Table 2).
equity issuance by UK PNFCs
(1)
It
drew on
funds.
(2)
(3)
(4)
Net
in
(5)
40
30
20
10
0
10
20
30
40
H1
   H2 2009
H1
H2
H1
H2
H1
H2
H1
H2
H1 July-Aug.   14
£ billions
Loans
Bonds
Equity
Total
(b)
10
11
12
13
+
components.
(a)
(1)
(2)
(3)
(4)
qb14q3.pdf.
(5)

12                                                                                                                                                           Trends in Lending October 2014

 

An update to estimates of external finance for

reflected a buoyant initial public offering (IPO) market,

 

UK businesses

according to market contacts. The value of total UK IPO

issuance in 2014 Q2 was the largest since the start of the data

 

There are many sources of finance for businesses for working

capital, capital investment and other purposes. Recent trends

in external finance for UK businesses were discussed in the

collection in 1984 Q2.

2014 H1 was positive for the first time since the second half

of 2010, according to Bank of England data (Chart A).

 

October 2013 edition of Trends in Lending.

existing statistics collected by the Bank of England,

Chart A Net external finance raised by UK businesses

from banks and capital markets

 

consultations with officials from the Department for Business,

 

Innovation and Skills (BIS) and HM Treasury (HMT), and wider

Commercial paper

 

information. The analysis concluded that debt financing from

 

banks and capital markets was a significant proportion of

 

external finance raised by all businesses. The available data

 

suggested that some alternative types of external funding

 

were of a reasonable size and growing, including asset-based

 

finance and lending by insurance companies and pension

 

This box presents updated estimates, where available, of

 

external finance for 2013 and 2014, drawing on

 

Bank of England statistics, consultations with officials from

 

BIS and HMT and other information (Tables 1 and 2). It

 

also includes new estimates on the flows of peer-to-peer

(a) Finance raised by PNFCs from MFIs and capital markets. Bonds data cover debt issued by

UK companies via UK-based Issuing and Paying Agents. Data cover funds raised in both

 

lending/crowdfunding, which were unavailable last year. No

sterling and foreign currency, expressed in sterling. Seasonally adjusted. Bonds, equity and

commercial paper are non seasonal.

 

updated estimates were available for private equity, business

(b) Owing to the seasonal adjustment methodology, this series may not equal the sum of its

 

angels and private placements.

 

The stock of debt finance raised by all businesses from banks

and capital markets (Table 1) remained a significant

proportion of external finance as at 2014 Q2. Gross bank

lending by monetary financial institutions (MFIs) to UK

non-financial businesses remained substantial in 2013 and

Gross bond and equity issuance by

Gross bond issuance in 2014 H1 was lower than that in

2013 H1 (Chart B). Net bond issuance was close to zero in

the year to 2014 H1, in contrast to positive issuance in the

previous three years (Chart A). It increased in the first two

months of Q3, as noted in Section 1, alongside positive net

issuance of commercial paper.

 

corporate businesses was also significant. These flows were

larger than those from alternative and newer sources of

funding, such as peer-to-peer business lending.

The vast majority of gross flows of external finance raised by

UK businesses in recent years were from bank lending and

capital market issuance, based on available data (Chart B and

 

Data on lending flows

The flow and cost of funding available from the different

sources of external finance is relevant for businesses’ decisions

Table 2). The largest flow of external finance raised was bank

lending to large businesses. The flow of new asset finance

(leasing and hire purchase) was smaller in comparison, though

 

on working capital, capital investment and other purposes.

For more details see the box ‘Estimates of sources of external finance for

 

Gross bank lending to non-financial businesses by MFIs was

£120 billion in 2014 to August (Table 2), 19% higher than the

UK businesses’ on pages 12–16 in October 2013 Trends in Lending, available at

www.bankofengland.co.uk/publications/Documents/other/monetary/

trendsoctober13.pdf.

 

comparable period in 2013. Repayments by these businesses

to MFIs also increased. Net bank lending to businesses

For brief descriptions of the terms used in this box see Table 1 of the October 2013

Trends in Lending box on page 12, available from the link in footnote (1).

The data on gross lending by MFIs are sourced from the Bank of England and include

 

remained negative in 2013 and 2014 to August (Tables 1.A,

loans, overdrafts and finance leases granted if on the MFI’s balance sheet. For more

details see ‘Explanatory notes — monetary financial institutions loans to

 

1.B and 2).

non-financial businesses, by size of business’, available at

www.bankofengland.co.uk/statistics/Pages/iadb/notesiadb/

 

loans_to_nonfinancial_businesses.aspx.

 

Larger businesses have greater access to alternative types of

For more details see ‘Markets and operations’, Bank of England Quarterly Bulletin,

Vol. 54, No. 3, page 325, available at

 

funding such as capital markets. Gross equity issuance by

www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/

 

UK private non-financial corporations (PNFCs) was larger in

For a description of recent trends in capital market issuance by major industrial

 

2014 to September than in each of the previous four years,

according to data from Dealogic (Table 2). This partly

sector, see the box on pages 7–9 in July 2014 Trends in Lending, available at

www.bankofengland.co.uk/publications/Documents/other/monetary/

trendsjuly14.pdf.

 

(1)
(2)
(3)
0
20
40
60
80
100
2011
12
13
14 H1
Per cent
None
Both
‘Core’ only
‘Other’ only
Chart C
(a)
0
20
40
60
80
Peer-to-peer
(b)
Equity market
issuance
Bank lending
to SMEs
Bond market
issuance
2013 H1
£ billions
0
20
40
60
80
2013 H2
Not known
Not known
0
20
40
60
80
2014 H1
flows available.
(a)
(1)
(2)
(3)

An update to estimates of external finance for UK businesses                                  13

 

was slightly higher in 2014 H1 compared to 2013 H1. Some of

each of bank lending and bond issuance as ‘attractive’ sources

 

this lending is likely to be to small and medium-sized

of funding, similar to recent quarters. Respondents to the

 

enterprises (SMEs).

survey also viewed equity issuance as an ‘attractive’ source of

 

funding in 2014 Q3, as they have for over a year.

 

SMEs can also use other types of external finance such as

peer-to-peer lending/crowdfunding. Flows of peer-to-peer

business lending increased in 2014 Q2 compared to the

previous quarter, though at £0.3 billion for the first half of

2014 were small compared to gross bank lending to SMEs

(Chart B). Flows of other forms of peer-to-peer

lending/crowdfunding, such as equity-based and reward-based

crowdfunding, were very small in 2013 (Table 2).

Capital markets are not commonly used by medium-sized

businesses for external finance, according to a survey

conducted by the British Business Bank in 2013.

Respondents to the survey — those with annual turnover

between £10 million and £500 million — reported that the

most widely used forms of external finance were trade credit

(59%), leasing or hire purchase (52%) and credit cards (46%).

Respondents also reported using a range of different loan

 

facilities, including overdrafts (32%).

 

Chart B Gross flows of external finance for

 

UK businesses, 2013 H1–2014 H1

The proportion of SMEs using only bank loans, bank overdrafts

 

or credit cards declined between 2011 and 2014 H1 from 29%

 

Bank lending to

large businesses

to 20%, according to the SME Finance Monitor (Chart C).

Notwithstanding this, these ‘core’ products remained the

 

most used option for those using external finance. The share

 

of respondents to the survey using ‘other’ forms of finance

 

(eg leasing, hire purchase or vehicle finance) remained broadly

 

similar over this period. More generally, the proportion of

 

SMEs using neither ‘core’ products or ‘other’ forms of finance

 

Asset finance (leasing

and hire purchase)

increased slightly over this period.

 

business lending

Use of external funding by SMEs

 

Sources: Dealogic, Finance & Leasing Association, Peer-to-Peer Finance Association,

 

Bank of England and Bank calculations.

 

(a) For further details on the data sources, see Table 2 on page 15.

 

(b) Data can include some invoice trading. ‘Not known’ indicates that there were no half-yearly

 

Data on stocks of lending

 

The stock of lending to UK PNFCs by UK banks and

 

building societies was £399 billion as at end-August 2014

 

and UK businesses had £318 billion of corporate bonds

 

outstanding as at 2014 Q2 (Table 1). The stock of lending by

 

insurance companies and pension funds continued to be a

 

reasonable size at £36 billion.

 

The stock of asset-based finance was smaller, though grew by

Source: SME Finance Monitor 2014 Q2.

 

10% in the year to end-June 2014, according to data from the

(a) The proportion of SMEs responding to the question: ‘Which of the following forms of

 

Asset Based Finance Association (Table 1). Around 40% of the

external finance does the business currently use?’. ‘Core’ products are bank overdrafts, bank

loans/commercial mortgages and credit cards. ‘Other’ forms of finance are leasing, hire

 

total outstanding advances were to businesses with annual

purchase or vehicle finance, loans/equity from directors/family/friends, invoice finance,

grants and loans from third parties. ‘None’ refers to SMEs not using either ‘core’ or ‘other’

 

turnover of over £50 million. Data on the stocks of other

forms of finance. The components may not sum to 100% due to rounding.

 

forms of finance raised, such as private equity, were

Trade credit was also reported to have been used by 30% of

 

unavailable.

SMEs in 2014 H1, according to the SME Finance Monitor.

 

When combined with those respondents who reported using

 

Qualitative information

 

A number of surveys provide qualitative information on

various external funding sources. The Deloitte CFO Survey

Available at http://britishbusinessbank.co.uk/performance/britishbusinessbank

researchmediumsizedbusinessesaccessfinancelessonstomorrowsmedium

sizedbusinesses/.

 

for 2014 Q3 — which covers large companies — reported that

Trade credit occurs when a company buys goods or services from a supplier with an

agreement to pay later.

 

a balance of around 75% of respondents to the survey viewed

Available at www.sme-finance-monitor.co.uk/.

 

away.
Association
(h)
(i)
14
6
3
5
15
6
4
5
16
6
5
5
16
6
4
6
18
6
5
7
19
6
5
8
(June)
(c)
(e)
(e)
(f)
(g)
Table 1 Estimates of the stock of some types of external finance for UK businesses (a) 2010 2011 2012 2013 2014
Source Type 2009
£ billionsBank lending Bank of England (b) 531583 479536 450504

189

315

427472

176

296

406448

166

282

399445

169

276

(August)

PNFCs
(d)
SMEs
Large
Bonds markets (public) ONS Amounts outstanding 293 290 319 371 349 318(Q2)
Insurance companies, pension funds ONS Loans 22 23 31 34 35 36(Q2)

 

14                                                                                                                                                           Trends in Lending October 2014

 

‘core’ and ‘other’ sources of finance in the survey, around half

look at lending opportunities that other banks had turned

 

of SMEs reported using some form of external finance in

 

this period.

 

Some main external financing options, such as bank lending,

 

Contacts of the Bank’s network of Agents continued

asset-based finance and leasing and hire purchase, are

 

to report a growing use of non-bank finance by SMEs,

generally used by all types of businesses. For details on the

 

including peer-to-peer lending and crowdfunding. Contacts

use of various external funding sources by business size, see

 

noted that these non-traditional funding providers were

Table 2 in October 2013 Trends in Lending. Overall, the use by

 

often more expensive than high street banks, but could

business size has not materially changed over the past year.

 

provide funds more flexibly or quickly, and were willing to

 

Amounts outstanding

 

Total non-financial businesses

 

Asset-based finance (eg factoring and invoice discounting)

Asset Based Finance

Total advances

£0–£10 million

 

£10 million–£50 million

 

Over £50 million

 

(a) The information contained in this table should be viewed as indicative as data and definitions are not directly comparable across different sources. Stock data are as at end-December, unless stated otherwise. Non seasonally

 

adjusted. For a description of the terms used see Table 1 of the box ‘Estimates of sources of external finance for UK businesses’ in October 2013 Trends in Lending, available at

 

www.bankofengland.co.uk/publications/Documents/other/monetary/trendsoctober13.pdf.

 

(b) Amounts outstanding data include overdrafts and loans in both sterling and foreign currency, expressed in sterling. Non seasonally adjusted. Movements in amounts outstanding can reflect breaks in data series as well as

 

underlying flows. For further details see www.bankofengland.co.uk/statistics/Pages/iadb/notesiadb/Changes_flows_growth_rates.aspx. For changes and growth rates data, please use the appropriate series or data tables from

 

Bankstats, available at www.bankofengland.co.uk/statistics/Pages/bankstats/current/default.aspx.

 

(c) Loans by UK-resident MFIs to PNFCs excluding the effects of securitisations and loan transfers.

 

(d) Loans by UK-resident MFIs to UK non-financial businesses. Data for 2009 and 2010 are not directly comparable to later years. The total may not equal the sum of its components due to rounding.

 

(e) SMEs are defined as those businesses with annual debit account turnover less than £25 million. Large businesses are defined as those with annual debit account turnover greater than £25 million.

 

(f)   Release United Kingdom Economic Accounts, Q2 2014, Chapter 3.3.9, Office for National Statistics. Available at www.ons.gov.uk/ons/rel/naa1-rd/united-kingdom-economic-accounts/q2-2014/bod-ukea-2014q2.pdf. Data are

 

not directly comparable to gross and net bond issuance data in Table 2.

 

(g) Release MQ5 Q2 2014, Table A, Office for National Statistics. Stock data are holdings at market value of loans to UK borrowers. For 2013 and 2014, stock data are calculated by adding quarterly flows to the previous year’s

 

stock. Available at www.ons.gov.uk/ons/rel/fi/mq5–investment-by-insurance-companies–pension-funds-and-trusts/q2-2014/rft-mq5-ref-tables-q2-2014.xls.

 

(h) Available at www.abfa.org.uk

 

(i)   Data cover the UK and Irish markets and are presented in client annual turnover bands. The total may not equal the sum of its components due to rounding.

 

(o)
Issuance
Not known
of
(c)
(e)
(e)
(f)
(g)
(i)
Gross
Dealogic
14
Association
(j)
Association
(k)
Nesta
Association
(m)
0.28
known
known
known
Association
(n)
Not
Table 2 Estimates of the flows of some types of external finance for UK businesses (a) 2010 2011 2012 2013 2014
Source Type 2009
Net flows £ billions Bank England PNFCs -46 -24 -9 -18-27

-8

-19

-9-16

-4

-12

-2-6

-2

-4

(to August)

(b)
(d)
SMEs
Large
Bonds markets (public) Bank of England (f) Net issuance 18 -0.1 15 19 12 5(to August)
Equity markets (public) Bank of England Net issuance 32 8 -10 -8 -5 6(to August)
Insurance companies, pension funds ONS Net loans                                  -2              18                        3            1 1
(to Q2)
Gross flows £ billionsBank lending Bank of England Gross lending (h) 14638

108

16343

120

12033

87

(to August)

Total non-financial businesses
SMEs
Large
Bonds markets (public) Dealogic issuance 48 27 38 67 55 46(to September)
Equity markets (public) (i) Gross issuance 26            12             58 21(to September)
Asset finance (leasing and hire purchase) Finance & Leasing New finance 21 21 21 22 22 16(to August)
Private equityof which venture capital British Venture Capital Amount invested 80.3 70.3 60.3 Not known Not known
Peer-to-peer lending/crowdfunding (l)Peer-to-Peer Finance New business lendingNew business lending

Amount invested

Amount invested

0.020.00

0.00

0.00

0.060.04

0.00

0.00

0.190.10

0.03

0.02

(m)
Peer-to-peer business lending (l)
(to Q2)
Invoice trading (l)
Not
Equity-based crowdfunding (l)
Not
Reward-based crowdfunding (l)
Not
Business Angels UK Business Angels Investment An estimated £850 million per United Kingdom. annum is invested by Angels in the known

 

An update to estimates of external finance for UK businesses                                  15

 

Bank lending

 

Total non-financial businesses

 

Private placements

Breedon Report

UK issuers account for nearly 21% of the global private investment market, though the majority of these issues are placed with US-based

investors. If UK institutional investors invested in private placements in the same proportion as US private placement investors, an

additional £15 billion of non-bank lending could be available for mid-sized businesses in the United Kingdom.

 

(a) The information contained in this table should be viewed as indicative as data and definitions are not directly comparable across different sources. There can be some double counting across estimates. Flows data are cumulative

 

totals for the year or to the date stated. Non seasonally adjusted. Most numbers have been rounded to the nearest billion. For a description of the terms used, see Table 1 of the box ‘Estimates of sources of external finance for

 

UK businesses’ in October 2013 Trends in Lending, available at www.bankofengland.co.uk/publications/Documents/other/monetary/trendsoctober13.pdf.

 

(b) Data include overdrafts and loans in both sterling and foreign currency, expressed in sterling.

 

(c) Loans by UK-resident MFIs to PNFCs excluding the effects of securitisations and loan transfers.

 

(d) Loans by UK-resident MFIs to UK non-financial businesses. For more details see Bankstats Table A8.1, available at www.bankofengland.co.uk/statistics/Pages/bankstats/default.aspx. The total may not equal the sum of its

 

components due to rounding.

 

(e) SMEs are defined as those businesses with annual debit account turnover less than £25 million. Large businesses are defined as those with annual debit account turnover greater than £25 million.

 

(f)   Data are not comparable to gross issuance data in this table due to the different sources.

 

(g) Release MQ5 Q2 2014, Table A, Office for National Statistics. Flows data are net investment and are calculated as the change in stock.   Available at

 

www.ons.gov.uk/ons/rel/fi/mq5–investment-by-insurance-companies–pension-funds-and-trusts/q2-2014/rft-mq5-ref-tables-q2-2014.xls.

 

(h) Data exclude overdrafts and cover loans in both sterling and foreign currency, expressed in sterling. See footnote (e) for definitions of SMEs and large businesses. The total may not equal the sum of its components due to

 

rounding. For net lending data excluding overdrafts see Bankstats Table A8.1, available from the link in footnote (d).

 

(i)   Bond issuance data may include issuance via the Order book for Retail Bonds (ORB). Data are not comparable to net issuance data in this table due to the different sources.

 

(j)   Available at www.financeleasingassociation.co.uk/wp-content/uploads/2014/03/FLA_keyfacts2012.pdf and via www.fla.org.uk/media.

 

(k) Available at www.bvca.co.uk/portals/0/library/files/news/2013/RIA_2012.pdf. The data include Management Buy Outs (MBO) and expansion capital for larger businesses.

 

(l)   Data for 2011–13 are from Nesta, available at www.nesta.org.uk/publications/rise-future-finance. 2013 data were captured between 25 November and 5 December and incorporate expected volumes for the remainder of the

 

year. Peer-to-peer business lending is debt-based transactions between individuals and existing businesses who are mostly SMEs. Invoice trading is firms selling invoices or receivables to a pool of individuals or institutional

 

investors. Equity-based crowdfunding is the sale of registered securities by mostly early-stage firms to investors. Reward-based crowdfunding are transactions where donors have an expectation that recipients will provide a

 

tangible (but non-financial) reward or product in exchange for their contribution.

 

(m) Data on new peer-to-peer business lending for 2014 are from the Peer-to-Peer Finance Association, available at http://p2pfa.info/about-p2p-finance. Data can include some invoice trading.

 

(n) Available at www.ukbusinessangelsassociation.org.uk/investors/background-angel-investment.

 

(o) Data from Breedon, T (2012), Boosting Finance Options for Business: Report of industry-led working group on alternative debt markets, available at

 

www.bis.gov.uk/assets/biscore/enterprise/docs/b/12-668-boosting-finance-options-for-business.pdf.

 

Symbols
payments.
are exchanged for
payments
different
financing of
A process
agreed margin over
corporations
Private non-financial All
Lending to households,
A statistical
Banking Group,
Banco Santander,
rates
Facility
period.
ratio
interest
at
in
market.
Major
HSBC,
Lloyds
Royal
Bank
of
(MFIs)
their
Net
lending
lending
of
debt
period.
and that
are not
are set,
with an
will
be Bank
Rate,
Libor
or
repay
their
current
of
a
the
of
for
niche
markets
that
scope of
interest
contract
interest
are a
retail
and
banks
to a
Except
is
of

16                                                                                                                                                           Trends in Lending October 2014

 

Abbreviations

London interbank

The rate of

which banks

 

BIS — Department for Business, Innovation and Skills.

offered rate (Libor)

borrow funds

from each other,

 

CDS — credit default swap.

marketable size,

in the London

 

CFO — chief financial officer.

interbank

 

CML — Council of Mortgage Lenders.

UK lenders

Barclays,

 

FLS — Funding for Lending Scheme.

Nationwide and

 

HMT — HM Treasury.

Scotland.

 

Libor — London interbank offered rate (see below).

Monetary financial

grouping comprising banks

 

LTV ratio — loan to value ratio (see below).

institutions

and building societies.

 

M4Lx — Sterling M4 lending excluding the effects of

Mortgage lending

secured against

 

securitisations etc.

the value of

dwellings.

 

MFIs — monetary financial institutions (see below).

The difference between gross

 

ONS — Office for National Statistics.

and repayments

in a given

 

PNFCs — private non-financial corporations (see below).

 

RICS — Royal Institution of Chartered Surveyors.

(and partnerships)

 

SIC — Standard Industrial Classification.

corporations

whose primary activity is

 

SMEs — small and medium-sized enterprises.

(PNFCs)

non-financial

 

controlled by central or local

 

Glossary

government.

 

Bank Rate

The official rate paid on commercial

Reference rate

The rate on which loans

 

bank reserves by the Bank of England.

the reference rate

 

Businesses

Private non-financial corporations.

(typically this

 

Consumer credit

Borrowing by UK individuals to finance

a swap rate).

 

expenditure on goods and/or services.

Remortgaging

whereby borrowers

 

Consumer credit is split into two

mortgage in favour

 

components: credit card lending and

new one secured on the same property.

 

‘other’ lending (mainly overdrafts and

A remortgage would represent

 

other loans/advances).

an existing property by a

 

Effective interest

The weighted average of calculated

mortgage lender.

 

interest rates on various types of

Specialist/other

Providers

mortgage loans

 

sterling deposit and loan accounts.

mortgage lenders

generally fall

outside the

 

The calculated annual rate is derived

mainstream mortgage lending.

 

from the deposit or loan interest flow

Swap rate

The fixed rate of

in a swap

 

during the period, divided by the

in which floating-rate interest

 

average stock of deposit or loan during

fixed-rate

 

the period.

Swap rates

 

An agreement in which a lender sets

key factor

in the setting of

 

out the conditions on which it is

fixed mortgage rates.

 

prepared to advance a specified

Syndicated loan

A loan granted by a group of

 

amount to a borrower within a defined

single borrower.

 

Gross lending

The total value of new loans advanced

and conventions

 

by an institution in a given period.

where otherwise stated the source of

data in charts

 

Loan approvals

Lenders’ firm offers to advance credit.

the Bank

England.

 

Loan to value (LTV)

Ratio of outstanding loan amount to

 

the market value of the asset against

On the horizontal axes of charts, larger ticks denote the first

 

which the loan is secured (normally

observation within the relevant period, eg data for the first

 

residential or commercial property).

quarter of the year.

 

© Bank of England 2014

 

ISSN: 2040-4042 (online)

Categories: Bank of England