Large corporations saw out 2015 on a borrowing surge, according to the latest Credit Conditions Survey from the Bank of England, with the rise in demand expected to rumble through the early part of this year.
Lenders that took part cited a growing appetite for M&A as a significant driver behind the increase – a view that tallies with supporting data from specialist research firm Dealogic, which showed that the average value of UK M&A deals has hit its highest level since the dawn of the millennium.
However, there are doubts whether the trend will continue in the long term, as the majority of lenders judged that the spike in M&A-based loans has been triggered by a series of very large deals occurring in a concentrated time span.
Banks also noted that M&A activity last year spurred a pattern of syndicated lending – ie, cases in which several institutions clubbed together to back deals – with some respondents citing a rise in that market of bridge-to-bond financing.
According to Dealogic, though, while gross, new syndicated-lending facilities in the UK last year stood at £113bn, that was significantly down on very strong levels recorded for 2014.
Indeed, most lenders noted that 2015 was typified by a decrease in refinancing activity.
While credit conditions were broadly brighter across the corporate landscape last year, the survey indicated that improvements in loan availability “have been less pronounced among smaller SMEs”.
Small companies have continued to report a tighter climate, with some noting that their finance options have been limited to invoice discounting.
Figures from BDRC Continental’s SME Finance Monitor have suggested that very small firms experienced higher rejection rates than larger SMEs over 2015, and that those planning to apply remained less confident in their ability to access bank finance than their larger counterparts.
Nonetheless, lenders also noted that demand from small firms fell – chiming with the SME Finance Monitor’s finding that, in Q3, 80% of SMEs described themselves as “happy non-seekers”.
In the household leagues, meanwhile, lenders reported a slight rise in demand for house-purchase funds in Q4, together with a larger rise for remortgaging. They also reported a rise in the availability of unsecured credit, continuing a three-year trend.
Richard Woolhouse, chief economist at the British Bankers’ Association, said: “This data demonstrates that banks are lending to households and businesses right across the country. Credit conditions are improving as demand for lending from households gathers steam.”
He added: “Unsecured lending increased significantly, but it remains well below pre-crisis levels. This suggests that reports the economy is in the midst of a credit bubble are most likely misguided.”