FLS business lending falls while P2P hits record high
Business loan volumes from UK peer-to-peer (P2P) lenders continued to grow vigorously in the fourth quarter of 2015, while net loan flows to SMEs from the Government-backed Funding for Lending Scheme (FLS) eased, new figures from AltFi Data reveal.
FLS business lending remained in positive territory but fell from £0.8bn in Q3 to £0.6bn in Q4. FLS participants (which, following the addition of a new lender, now number 37) accounted for lending flows totalling £2.365bn for 2015 as a whole.
In November last year, HM Treasury and the Bank of England extended the FLS for a further two years to grant its participants additional flexibility to harness unused drawing allowances generated by positive net lending over the last three years. However, the Bank of England said that FLS participants will not produce further allowances from lending after the close of 2015, making the latest figures for Q4 the last publication of its kind. The scheme is to be phased out over the next two years.
Meanwhile, the alternative finance space is poised to continue to expand as the FLS phase-out progresses. In Q4 2015, P2P lender platforms saw business lending volumes hit a record-breaking £446m – £24m above the previous high.
As AltFi Editor Ryan Weeks puts it: “In the early days of our FLS coverage, the narrative was of alternative lenders plugging up the funding gap that had been created by FLS fall-offs. The story is now about the coalescing of a firing-on-all-cylinders FLS and the rapidly expanding peer-to-peer business lending sector. All told, encouraging signs for UK SMEs.”