Alternative remedies scheme boosts supply of SME lending at the wrong moment
Most UK SMEs applying for loans have their applications approved, raising worries that banks have loosened standards just as risk mounts.
At the end of June, UK Finance, the trade body of the UK banking industry, unveiled a survey of 18,000 small and medium-sized enterprises, which produced the happy finding that most are succeeding in accessing finance from banks, with 80% of applications being approved by lenders.
That’s supposed to be the good news. But it might be the bad.
These companies have more than access to credit on their minds. Stephen Pegge, managing director, commercial finance at UK Finance, admits: “This survey suggests many small businesses across the country are increasingly concerned about the ongoing uncertainty over Brexit.”
Concern extends to the worsening economic climate and is highest among small firms in London, the north east and west midlands.
They should take courage, though. Pegge says: “The banking and finance industry is ready to support viable businesses whatever the outcome.”
That may be nice for them to hear, but Fitch is worried about some banks being too accommodative. “UK challenger banks may be more vulnerable than more established banks to late-cycle and Brexit-related risks,” Fitch Ratings found in a report published on the same day as UK Finance's survey results.
This echoes the recent findings of a review by Melanie Beaman, director of UK deposit-takers supervision at the Prudential Regulation Authority, that fast-growing lenders with a limited track record could be underestimating potential losses on their loan portfolios.