Cheap credit, reluctant borrowers

Through the first pandemic year, UK finance chiefs told Deloitte the same thing every quarter: credit was getting cheaper and easier to obtain. By the end of 2020 the survey’s availability balance had climbed to +33% and the share rating credit cheap to +52%, both improving through the worst of the shock. Yet the same CFOs stayed firmly risk-averse. That split, abundant cheap credit meeting reluctant borrowers, was the mood every lower-mid-market company negotiated against.

This is the desk’s quarterly read of the credit mood, and it comes with a caveat we will not bury. The Deloitte UK CFO Survey polls the finance chiefs of large UK corporates (FTSE names and big privates), not the £3–15m borrower we work with. Its absolute readings are more generous than the terms a lower-mid-market company actually meets. What it gives you is not a price sheet; it is a leading read on direction, and through 2020 the direction was unambiguous.

Was credit actually available in 2020?

On the survey, yes, and increasingly so. The availability net balance, the share of CFOs rating new credit available minus those finding it hard to get, began 2020 barely positive at +2%. It then rose in every subsequent quarter as the emergency response landed: the Bank Rate cut to 0.10%, the term funding scheme, the government-guaranteed loan schemes pushing liquidity through the banks. By the Q4 2020 survey it stood at +33%.

Read that line carefully, because it runs against intuition. 2020 was the deepest recession in living memory, and the natural expectation is that credit dried up. For the smallest and most distressed firms, in places, it did. But at the level the survey measures, the policy response more than offset the fear: the taps were opened deliberately and wide, and CFOs felt it. Availability did not collapse in the crisis — it improved through it.

And was it cheap?

Also yes. Deloitte publishes cost of credit as a net balance of CFOs rating it costly against cheap; through 2020 that balance sat well into negative territory, which is to say credit was rated cheap by a widening margin. Charted as its mirror, a net balance rating credit cheap, it rose from +10% in the first quarter to +52% by the third and held there into the new year, tracking the Bank Rate to its 0.10% floor.

So why did borrowers hesitate?

The same CFOs who rated credit cheap and available spent all of 2020 saying it was not a good time to take greater risk onto the balance sheet. That risk-appetite balance opened the year at −94% at the pandemic’s onset and, while it recovered as the year went on, was still deeply negative at −62% by the fourth quarter. Cheap money and the willingness to use it had come apart.

For a lower-mid-market CFO reading these signals at the time, the practical inference was not subtle. When the market rates credit cheap and available and its own participants are too cautious to lean in, a lender has capital to place and fewer confident borrowers to place it with. That is the moment terms are most negotiable — not because the borrower is desperate, but because the lender is. The companies that refinanced or extended in that window locked in a cost base they would not see again once the mood turned.

The survey is a large-cap panel and a mood gauge, not a quote for a £3–15m facility, and single-quarter moves on a ~100-CFO sample are within noise; the trend is the signal, not any one point. We read it here as a directional overlay on the harder lending-volume data, exactly as we would use it live: to time a conversation, never to price one.