Lending and Business Borrowing in 2019

Carl Jackson discusses the trends within lending and business borrowing in 2019


Quantuma's Carl Jackson discusses the trends within lending and business borrowing in 2019.

With Brexit looming and the uncertainties attached to this process, it is not a surprise to hear a few commenting on the fragility of small to medium-sized enterprises (SMEs) with some predicting a ‘crash-n-burn’ scenario for the most vulnerable. This view is supported by recent insolvency statistics that indicate an increase in both personal and corporate failures for the first time in many years with the trend likely to continue.

The Bank of England are also adding further fuel to the fire having voiced concerns over the level of high-risk lending in the market, with £38 billion of loans recorded in 2017 and a similar amount expected in 2018. Interestingly, if the asset-based lending (ABL) market is to be viewed as a useful health barometer of UK SMEs, the consistent message from lenders is that impairments are increasing, frauds are more frequent, there is greater prevalence of peer-to-peer loans in default, and client failures are generally on the rise.

Since the financial crisis in 2008, the UK economy and financial services sector has seen a resurgence in the last decade with the markets awash with cash. If the indicators are to be believed, then the predictions are that access to funding may become more challenging as lenders tighten their credit appetite to weather any downturn.

A no-deal Brexit could very well plunge the country into a recession although a half-way house is the best that most of us can hope for. Assuming we end up with the latter, the road will be a bumpy one for SMEs and whilst it will pose challenges for some, it will also create opportunities for others.

One thing is for sure and it is that it will be the survival of the fittest for SMEs.