Source · Select Committees · Public Accounts Committee
Recommendation 22
22
The NAO reported that there were seven accredited lenders when the Scheme launched in May...
Conclusion
The NAO reported that there were seven accredited lenders when the Scheme launched in May 2020, consisting of five main UK banks and two other banks.55 The Bank acknowledged that it took several months to accredit the additional 21 of 28 lenders in total to the Scheme, by which time most of the loans had been already been handed out.56 The NAO highlighted analysis by Innovate Finance, a representative body for non-bank lenders, which showed that in 2020 the main banks increased their market share from 35% to 56%—while alternative lenders’ total lending remained constant year-on-year.57 The Bank explained that the main UK banks were responsible for 90% of the Scheme lending but that they had a smaller market share in other COVID-19 related loans schemes like the Coronavirus Business Interruptions Loan Scheme or the Recovery Loan Scheme. Alternative lenders and smaller banks provide nearly 95% of lending under the Bank’s other core loan schemes, according to the Bank.58
Government Response
Not Addressed
HM Government
Not Addressed
6: PAC conclusion: The Scheme has distorted the Small and Medium Enterprise (SME) lending market in favour of the largest UK banks, which goes against the Bank’s objective of creating a diverse finance market for SMEs. 6a: PAC recommendation: The Bank should develop a strategy to mitigate the negative impact of the Scheme on the SME lending market and publish its findings in its next Small Business Finance Market report. 6.1 The government agrees with the Committee’s recommendation. Target implementation date: Spring 2023 6.2 As highlighted in the Bank’s most recent Small Business Finance Market Report, the provision of alternative finance recovered somewhat in 2021-22, reflecting the ending of the COVID-19 loan guarantee schemes in March 2021. Challenger banks regained the market share they had pre-pandemic, asset finance and invoice lending grew but was still below 2019 levels, and marketplace lending began to increase again. 6.3 The Bank has an explicit objective to improve the diversity of finance products and providers. It continues to monitor trends in the small business finance market and engages closely with stakeholders across the landscape. The next iteration of the Small Business Finance Market report, expected in Q1 2023, will continue to report on the evolution of the small and medium-sized enterprises (SME) lending market. 6.4 The Bank’s existing programmes continue to help challenger and specialist banks to make the SME banking market more diverse, for example through ENABLE Guarantees, the British Business Investments subsidiary, the Regional Funds, and the Recovery Loan Scheme.