Presentation slides sbfm 2021 final
- 1. Small Business Finance Markets report 20/21 Key findings Alice Hu Wagner 10th March 2021 british-business-bank.co.uk @BritishBBank Official
- 2. Key findings 1 Please delete once read IMAGE GUIDANCE Click icon in the image box icon to autofit within the image box.
- 3. The UK economy suffered greatly in 2020 GDP contracted by 9.9% over the year 2 • GDP is not forecast to return to pre-pandemic levels until 2022 • Unemployment is forecast to increase significantly in 2021 -20 -15 -10 -5 0 5 10 15 20 2008 2010 2012 2014 2016 2018 2020 Percent change in GDP
- 4. Redundancies reached a record high Number of redundancies reported reached 370,000 3 • The number of people reporting redundancy in the three months prior to interview increased by a record 217,000 on the quarter to reach 395,000 in Sep-Nov 0 50 100 150 200 250 300 350 400 450 2008 2010 2012 2014 2016 2018 2020 Redundancies, (000s)
- 5. SME confidence collapsed in 2020 The FSB Small Business Index fell to -143 in Q1 4 -150 -100 -50 0 50 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 • Q4 FSB Small Business Index confidence measure stood at -49.3 • The second lowest in history, second only to that recorded in Q1 2020 • 80% of those surveyed in Q4 did not expect their performance to improve over the next three months • 58% actually expected profits to fall in the next three months, a record high FSB Small Business Index
- 6. Use of repayable external finance fell in 2020 5 • Use of external finance by small businesses declined to 37% in 2020 from its peak of 45% in 2019 • It fell to 30% H1 2020, the lowest response since the launch of the SME Finance Monitor survey • Likely reflects the significant use of non-debt government support schemes and caution 0 5 10 15 20 25 2012 2013 2014 2015 2016 2017 2018 2019 Q1'20 Q2'20 Q3'20 Q4'20 Bank loan / commercial mortgage Bank overdraft Credit cards Leasing / hire purchase But use of bank loans rocketed Percent of SMEs using external finance, by type Year Quarter
- 7. Applications for external financial support rose in 2020 6 • 45% of SMEs applied for external financial support in 2020, up from 13% in 2019 and 2018 • Use of personal funds increased to 32% in 2020, up from 24% in 2019 • This was driven by those who felt they had to inject personal funds rather than those who chose to 0 5 10 15 20 25 30 35 40 45 Commercial mortgage Private lending / finance company Loans from directors/individual/organisation Other Credit card finance Bank overdraft Leasing/hire purchase Bank loan Government or local government grants 2018 2019 2020 Percent of SMEs using finance, by type This is largely driven by grants and bank loans
- 8. The smallest SMEs have been hardest hit Nearly half of zero employee businesses had spent all of most of their finance facilities by Q3 2020 7 • In Q3, 49% of zero employee firms reported a fall in turnover over the previous 12 months • Micro and zero employee businesses are least likely to expect to grow over the next 12 months at 27% and 19% • 76% of zero employee businesses sought finance to support cashflow • Only 17% had spent little or none of their finance facilities 17% 21% 36% 25% 34% 43% 39% 54% 49% 36% 25% 21% 0% 20% 40% 60% 80% 100% No employees 1-9 10-49 50-249 Employees Funding spent Little/none Funding spent Quarter/half Funding spent All/most Percent of SMEs by funding use and size
- 9. SMEs in some sectors were hit harder than others Several sectors experienced notably worse outcomes 8 • Outcomes were also worse in some sectors for measures such as redundancies, which were most often reported from SMEs with 10-249 employees in Hospitality (30%) and Wholesale and Retail (21%) sectors Percent of SMEs reporting a 12 month decline in turnover, by sector 0 10 20 30 40 50 60 70
- 10. Business investment overall slumped Business investment fell by 22.1% in Q2 2020 9 • The largest fall in business investment during the global financial crisis was 9.6% • It bounced back somewhat in Q3, 14.5% was a record quarterly increase • Despite this, business investment fell 10.7% between 2019 and 2020 -25 -20 -15 -10 -5 0 5 10 15 20 2008 2010 2012 2014 2016 2018 2020 Percent change
- 11. SME cash balances increased sharply Balances have increased by almost a third since the start of the pandemic 10 • 28% of SMEs have cash balances over £10,000, up from 23% in 2019 • This has been driven by cost cutting, utilisation of support schemes, precautionary saving and precautionary borrowing 0 50 100 150 200 250 300 2012 2013 2014 2015 2016 2017 2018 2019 2020 £ billion
- 12. Indebtedness is also a concern Driven by diminishing turnover, debt repayments became a worry in Q2 and remained elevated 11 • The majority of sectors saw 20%-30% of SMEs take a loan during the pandemic • Across both BBLS and CBILS, 59% of SMEs have borrowed more than 20% of their reported turnover 0 5 10 15 20 25 30 35 All 0 emps 1-9 emps 10-49 emps 50-250 emps Q1 Q2 Q3 Q4 Percent of SMEs concerned about repayments over the next 12 months, by size
- 13. Banks and alternative finance providers have significant capacity to support further lending 12 • Banks have sufficient capital to absorb around £200bn of credit losses • Non-bank lenders are ready to return to the market as demand for their products returns • Record fundraising in 2020 suggests VC funds have sufficient capacity to invest in high growth companies in 2021 and beyond 0 2 4 6 8 10 12 14 16 18 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Q3 CET1 capital ratio Aggregate CET1 capital ratio of major UK banks have continued to increase
- 14. If confidence returns, we could see a boom in investment and growth 13