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Invoice financing continues to set new records despite growth rate slowing in line with UK GDP

Mon 30 Apr 2018

Balance of pure invoice finance exceeds £18.9 billion at end of Q4 2017, 5.4% up from the same point in 2016

Quarterly growth of 0.25% remains aligned with UK GDP which rises 0.39%

New figures released by UK Finance1 show that the balance of pure invoice finance reached £18.93 billion as of the end of Q4 2017. This marks an increase of 0.25% from £18.88 billion from the end of the previous quarter and a rise of 5.4% from £17.97 billion at the end of 2016.

The growth further supports the view that invoice finance is the preferred method of business lending to small to medium businesses and suits an increasing number of business in the service-led economy, which is likely to drive continued development.

The quarterly figures also continue to support a close correlation with growth in UK GDP2, with the strength of the economy a crucial factor in how much businesses are willing and able to borrow. It is notable, therefore, that with UK GDP not growing as quickly as in previous years or at the rates seen across other global nations, that pure invoice finance has also seen a slowdown.

The UK economy grew by 0.39% in the final quarter of 2017 and 1.42% over the course of the year, a slower rate of growth than Q3 2017 (0.46%) and across 2016 (1.99%). Similarly, the increasing balance of invoice finance has experienced two consecutive quarters of deceleration from 4.46% and 1.57% in Q2 and Q3 2017 respectively, and substantially down on the 8.94% growth generated in Q4 2016.

Aaron Hughes, Managing Director of Equiniti Riskfactor comments:

Usage of invoice finance continues to grow as per the latest quarterly UK Finance figures. This method of business lending offers quick, reliable access to cash often on flexible terms while minimising the risks inherent in the cashflow systems of many small to medium enterprises such as late payments. While the balance of invoice finance did not grow as rapidly as it has in many quarters, it is reassuring to see that borrowing remains in correlation with the UK economy, ensuring that businesses and lenders are not over-stretching themselves. We would expect to see borrowing surpass £20 billion in 2018 as invoice finance continues to power small to medium enterprise in the UK.”

For more information:

Sources:

1: Invoice finance and Asset Based Lending – Quarterly statistics to December 2017: http://www.abfa.org.uk/statistics/2017/Q4%202017/UK%20FINANCE%20-%20Asset-based%20finance%20statistics%20Q4%202017.pdf

2: Gross Domestic Product: chained volume measures: Seasonally adjusted £m: https://www.ons.gov.uk/economy/grossdomesticproductgdp/timeseries/abmi/pgdp