Exclusive: Building societies slash business lending by a third
Building societies have slashed their business lending by a third in the five years, City PM can exclusively reveal.
According to new figures from accountants BDO, the amount of money lent by the UK’s biggest building societies has dropped from £11.8bn in 2015/16 to just £7.9bn last year.
The fall in lending comes at a time when businesses are seeking alternative ways to secure financing amid the coronavirus-led downturn.
With the government’s flagship CBILS programme due to shut on 31 January, it is likely that needy businesses could be faced with a gap in the market.
Nationwide, the UK’s largest building society, accounted for 56 per cent of all business lending in the last financial year, but has warned that it will further reduce lending in the future.
Back in April it warned that an expansion into the business financing market was no longer viable.
Leigh Treacy, head of financial services advisory at BDO, said: “Coming out of the last credit crunch, building societies were often spoken of as potential challengers in the business finance market. That now appears unlikely to happen.”
“Business finance is not the easiest market to enter for challenger lenders – it requires investment in loan origination, underwriting and risk management.”
Based on the last five years, however, it looks as if such companies will instead focus more on residential property lending.
Over the period, the amount of this type of lending has increased by 10 per cent among the country’s biggest building societies. Last year, such lending topped £326bn.
“With the barriers for entry into business lending set quite high, it seems that building societies have chosen the simpler option of increasing their lending in their core area of residential property”, Treacy said.
BDO also warned that it was possible that a number of the smaller building societies would be snapped up by larger firms in the coming years.
The smallest ten building societies in the UK have a total combined loan book of less than £2bn, just over one per cent of Nationwide’s lending alone.