The pandemic has had a huge effect on all of our businesses and as a result commercial banks have, at best, become extremely cautious in their lending appetite, with some withdrawing from the market altogether.

Some banks have focused entirely on the Coronavirus Business Interruption Loan Scheme or the Bounce Back Loan Scheme, which has also given them a reason not to lend outside of government support programs.

The general view of a commercial bank – that every company that took out a CBILS or BBLS loan was under stress – also meant that it was therefore reluctant to consider a mortgage loan to these companies.

The broader economic data of rising unemployment, the continued growth in online shopping and the adoption of working from home all paint a grim picture. Then, of course, we can add Brexit for good measure and we have a very uncertain economic outlook for 2021.

However, the residential and rental markets are both flourishing despite the economic outlook, and while stamp duty relief is a factor, it is not the ultimate solution.

Taxation could also undergo some changes in 2021. Changes in the capital gains tax have been expressed and, more generally, how the government should restore the public finances which were used to support the country in the after the pandemic?

Data on the performance of different sectors is taken into account by banks to inform the appetite for loans in each sector. However, this leads to the aforementioned general approach; for example, the appetite or lack of appetite of commercial banks for the hospitality or retail sectors.

In 2021, I think, there will be a shift towards a “thinner clamp” approach so that lenders can support individual businesses, regardless of their industry. This will involve a more detailed review and due diligence on each company to allow a claim to be supported; which means that brokers will need to really understand their trading clients in terms of past performance, current position, and future trading plans.

Looking ahead, there are several reasons to be optimistic about 2021 in the commercial finance market:

Retail – While the surge in online shopping will undoubtedly continue, the traditional retail experience will have been missed by many during the lockdown. The opportunity to lead the public back to local shops must be a priority, especially for small towns. This could manifest itself in tariff breaks for businesses, to attract independent retailers and to make Main Street more attractive and different from the normal out-of-town shopping experience.

Manufacturing – As a country, we will have to manufacture more after Brexit and depend less on imported products. Supply chains around the world have been damaged during the pandemic and that, along with Brexit, with or without a deal, will reinforce the need for UK businesses to increase production capacity.

Hospitality – The increased likelihood of a Covid-19 vaccine in early 2021 will be music to the hospitality industry as people will be able to live their lives in a much more pre-pandemic way. This means that restaurants, pubs, hotels, and guest houses will be a much more attractive proposition for a commercial lender.

Trip – Travel demand from the UK population has not declined despite the pandemic and there is no reason to suggest otherwise in 2021. The question is: will UK holidaymakers choose a UK destination or will- do they still crave faraway destinations? Brexit may have an influence on this decision-making, but the UK hotel industry could still have a banner year, making it an attractive sector for lending.

Desks – While the flexibility of working from home has been welcomed over the summer, the lack of human interaction is starting to take its toll. A return to some office work is likely in 2021, which would mean office demand could return.

Kevin Thomson is Commercial Director at Connect for Intermediaries