UK credit & lending weekly digest

Risk moves off bank balance sheets — toward directors, suppliers and specialist finance — Covering 19–25 April 2026 · Published Tuesday 28 April 2026

Summary

This week’s credit signal is fragmentation, not uniform tightening. Banks are still competing on mortgage pricing, while SME risk is surfacing through director guarantees, supplier payment terms and specialist finance channels.⁶ ⁷ ¹³ ¹⁴

Motor-finance redress is back in live legal risk after Consumer Voice challenged the FCA’s PS26/3 scheme, which carries an estimated £9.1bn total cost.¹ ²

Corporate stress broadened, with EY-Parthenon recording 55 Q1 profit warnings and 49% citing policy or geopolitical uncertainty.³ The clearest borrower-side signal was PGI: applications rose 65% YoY, while restaurants using revenue-based finance rose 43% YoY.⁶ ⁷

1. Key developments

• Motor-finance redress is unsettled
  Consumer Voice challenged the FCA’s PS26/3 motor-finance redress scheme, which covers customers treated unfairly between 2007 and 2024.¹ ² The challenge creates potential upside risk to the current compensation estimate, but not a confirmed reset.²
• Profit warnings remain elevated
  EY-Parthenon recorded 55 warnings in Q1 2026. Policy and geopolitical uncertainty were cited in 49% of warnings, while 19% of UK-listed companies warned over the previous 12 months.³
• Mortgage regulation may loosen at the margin
  The PRA and FCA proposed removing the firm-level 15% cap on high loan-to-income lending, while keeping the aggregate market-wide limit. The consultation closes on 1 July 2026.⁴
• Bank Rate is expected to hold
  The MPC meets on 30 April, and a Reuters poll found economists expected Bank Rate to remain at 3.75%.⁵
• Director-risk exposure is rising
  PGI applications rose 65% year on year in Q1 2026, with the average guarantee value reaching £210,350.⁶
• Hospitality is using more specialist finance
  Restaurants using revenue-based finance rose 43% year on year in Q1 2026, according to 365 Finance.⁷

2. Market signals

• Credit quality and risk
  Corporate stress broadened in Q1, with 19% of UK-listed companies issuing at least one profit warning in the past 12 months, and 49% of Q1 warnings citing policy or geopolitical uncertainty — the highest proportion in over 25 years.³ The rise in personal guarantee insurance applications adds a borrower-side signal: more directors are insuring personal liability attached to business borrowing, which is a useful watchlist trigger for underwriters rather than proof of broad bank tightening.⁶ Motor-finance provisioning remains unsettled pending the legal challenge to PS26/3, and Cifas recorded record fraud levels in 2025 — a reminder that faster SME decisioning needs robust verification to match.⁸ ¹ ²
• Credit supply and lending conditions
  Mortgage pricing eased at the margin, with Halifax and TSB cutting fixed rates, though this reflects swap-rate competition rather than any broader shift in credit appetite.¹⁴ The PRA and FCA's LTI consultation, if implemented, would remove the individual-firm high-LTI flow limit while keeping the aggregate market guardrail in place — a structural positive for specialist and challenger lenders with affordability flexibility.⁴ In SME finance, the 43% rise in restaurant use of revenue-based finance is best read as reallocation toward specialist channels rather than evidence of blanket bank rejection.⁷

3. Where to pay closer attention

• Hospitality
  Restaurants using revenue-based finance rose 43% year on year, while pubs and bars saw a 39% rise in successful funding applications.⁷ This points to greater use of flexible working-capital channels, not necessarily confirmed bank rejection.⁷
• Construction and building materials
  Travis Perkins’ reported move from 30-day payment terms to 60 days from the end of the invoice month shows how working-capital pressure can shift to suppliers.¹³ BMF described a stagnant building-materials market continuing into 2026, while CPA cut its 2026 construction-output growth forecast to 1.7%.²³ ²⁴
• Listed SMEs and policy-sensitive mid-caps
  With 19% of UK-listed companies warning over the previous 12 months, policy-sensitive borrowers deserve closer monitoring.³
• Commercial real estate
  March’s administration spike was driven by more than 100 connected real-estate companies, so it is a watchlist trigger rather than proof of a broad sector collapse.⁹
• Motor finance
  PS26/3 created a framework, but the legal challenge means provision adequacy remains a live question for exposed lenders.¹ ² ¹⁵

4. Friction signals — where credit is failing

• Personal guarantees
  New or expanded PG cover should be treated as a borrower-risk signal. A 65% rise in PGI applications suggests more directors are taking or insuring personal exposure linked to business borrowing.⁶
• Supplier terms
  Payment-term extensions are working-capital signals. Travis Perkins’ move to 60-day terms shows suppliers can become de facto financiers when cash pressure rises.¹³
• Revenue-based finance
  A borrower moving into revenue-based finance should trigger updated bureau checks, merchant-receipts review and cash-flow validation.⁷ ⁸
• Data quality
  Cifas’ fraud data reinforces the need for stronger KYB, bureau triangulation and management-account validation in faster SME-credit decisioning.⁸

5. Who is doing what

• Lloyds remains the main listed-bank reference point for motor-finance exposure. It has kept a £1.95bn provision and reports Q1 results on 29 April.¹⁵ ¹⁷
• Barclays reports Q1 results on 28 April, with UK NII, provisioning tone and business-credit appetite the key reads.¹⁶
• NatWest continued on-market buybacks during 20–24 April, purchasing 7,406,000 ordinary shares through UBS.¹⁸
• HSBC, along with Halifax and TSB, cut fixed mortgage rates during the week, signalling mortgage-pricing competition rather than verified broad credit easing.¹⁴
• GB Bank joined Knowledge Bank’s criteria platform, giving brokers access to its specialist buy-to-let, bridging and complex-case criteria.¹⁹
• Wayflyer secured a $250m two-year credit facility with ATLAS SP Partners, showing institutional funding remains available for specialist SME-credit platforms.²⁰
• Allica Bank reported a £3.7bn loan book for 2025 and completed the acquisition of Kriya, adding invoice-finance and embedded-finance capability.²¹

6. Capital & deployment

• Capital is not leaving the system uniformly; it is being redeployed by channel
  Major banks are returning capital or competing in standardised markets, while specialist lenders and fintech platforms continue to attract funding for SME and working-capital products.¹⁴ ¹⁸ ²⁰ ²¹
• The operating read
  High-street lenders are competing where risk is clearer and more standardised, especially mortgages. Specialist lenders and fintech platforms are taking more flow where underwriting depends on revenue, receivables, merchant receipts or complex borrower profiles.⁷ ¹⁴ ¹⁹ ²⁰ ²¹
• The contrast matters
  NatWest’s buyback points to capital-return discipline at the high-street end, while Wayflyer’s facility and Allica’s expansion show capital still flowing into specialist SME finance.¹⁸ ²⁰ ²¹

7. From the industry

• Broker placement remains important
  NACFB reported 1,414 member firms and 3,011 brokers as of January 2026, reinforcing the role of brokers in placing more complex borrower profiles.²²
• Building-materials demand remains weak
  BMF’s winter forecast described a stagnant building-materials market continuing into 2026.²³
• Construction growth expectations have been cut
  CPA’s winter forecast put 2026 construction-output growth at 1.7%.²⁴
• BNPL regulation is moving toward go-live
  Firms can register for the FCA temporary permissions regime from 15 May to 1 July, and the BNPL/deferred-payment credit regime changes on 15 July.²⁵

8. What this means

Credit has not disappeared. It is moving.

Banks are still active in standardised markets, especially mortgage pricing.¹⁴ But SME stress is showing up through personal guarantees, revenue-based finance, supplier terms and fraud controls.⁶ ⁷ ⁸ ¹³

For credit teams, channel migration should be treated as a risk signal. Moving from bank debt to specialist finance is not automatically negative, but it should trigger updated bureau checks, cash-flow review and sector-level monitoring.⁶ ⁷ ⁸

Motor-finance redress should also stay on the watchlist. PS26/3 created a framework, but the legal challenge means provision adequacy remains live for exposed lenders.¹ ² ¹⁵

9. Week ahead

• Bank of England MPC decision
  Scheduled for 30 April. Economists expect Bank Rate to hold at 3.75%, so the statement language will matter more than the rate decision.⁵
• Bank Q1 results
  Barclays reports on 28 April, and Lloyds reports on 29 April. Lloyds’ update is especially relevant for motor-finance provision commentary.¹⁵ ¹⁶ ¹⁷
• Insolvency data
  The next Insolvency Service release will show whether March’s real-estate-led administration spike was a one-off cluster or the start of a broader pattern.⁹
• BNPL regulation
  The FCA’s temporary permissions registration window opens on 15 May and closes on 1 July. The regime changes on 15 July.²⁵

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The UK Credit & Lending Weekly Digest is published every Tuesday, covering the developments that matter to lenders and anyone with a stake in the UK credit market. If you found this edition useful, follow along for next week's update!