BUSINESS FINANCE REVIEW FOR Q1 2020 PUBLISHED

The number of loans and overdrafts approved to SMEs rose by 41.9 per cent in Q1 2020 compared with the previous quarter, according to UK Finance's latest Business Finance Review published today. While there was growth across all sectors, the increase was especially marked in accommodation & food service (up 74 per cent) and recreation and personal services (up 69 per cent).

Stephen Pegge, Managing Director of Commercial Finance, comments:

After being buffeted by uncertainty through 2019, SMEs were faced with the economic shock of the Covid-19 pandemic in the early months of 2020.

?While the full effects of lockdown were not felt until the end of March and support measures were not fully operational until April, our data shows that many companies entered this period with some degree of financial headroom through a combination of existing facilities and deposits.

?Nevertheless, there were some early actions to get the right financing in place to manage through the oncoming downturn. This was initially focused on new overdraft facilities, where we see some notable growth across all industry sectors and regions.

?The finance industry has also been working closely with government, regulators and businesses as additional support schemes have been introduced to manage through this crisis and will continue to assist viable businesses as they plan for recovery.

HM TREASURY PROVIDES £1.5 BILLION SUPPORT PACKAGE TO ARTS SECTOR

The government has announced a £1.5 billion support package for the arts sector to help Britain's struggling theatres, venues and museums that have been impacted by the coronavirus crisis (Financial Times, £, p1). The funding includes £880 million of grants and £270 million of repayable loans, with further details expected to be announced in due course.

This comes ahead of the chancellor's Summer Economic Update on Wednesday where he is expected to announce plans to lift the stamp duty threshold from £125,000 to as much as £500,000 (The Times, £, p1). The rise in the threshold will be a temporary measure to help stimulate the housing market and will be announced alongside several other measures to support the economy including a temporary VAT cut for pubs, restaurants and cafes, as well as offering companies £1,000 for each apprentice they take on and a green jobs package. The chancellor is also expected to announce a new £111 million scheme which will reward companies that recruit young people as trainees (The Telegraph, £, p1).

Meanwhile, HM Treasury is reportedly reviewing the access to state-backed loan schemes following the European Commission's relaxation of state aid rules (The Telegraph, £, B1). Treasury sources said that UK firms rejected for emergency help under the EU's financial difficulty tests could potentially reapply if the loan schemes were amended.

NEWS IN BRIEF

Foreign Secretary Dominic Raab will today name the first foreign citizens to face visa bans and asset freezes for alleged human rights abuses under Britain's new post-Brexit sanctions regime (Financial Times, £, p2).

According to research by the Home Builders Federation, around 18,400 home purchases using Help to Buy are at risk from construction delays due to the pandemic (The Times, £, p34).

Venture capitalists have called on the government to change current rules to allow them to invest more cash into struggling early stage businesses during the coronavirus downturn, according to trade body Venture Capital Trust Association (VCTA) (Financial Times, £, p11).

The pandemic could potentially "level down" the UK economy with London and the South East expected to bounce back more quickly than Hull and Bradford, according to a report from the Social Market Foundation (SMF) (BBC News).

LATEST BLOGS

Rebecca Simons from our Capital Markets and Wholesale team discusses a recent UK Finance webinar that looked at progress on the UK-EU trade negotiations and their likely impact on financial services.