The Price of UK Commercial Credit Lines: A Research Note


  • They would like to thank Holger Görg for helpful comments on an initial draft. The usual disclaimer applies.

* Address for correspondence: Aoife Hanley, Nottingham University Business School (NUBS), Industrial Economics Division, Jubilee Campus, Wollaton Rd., Nottingham NG8 1BB, UK.


Abstract:  The UK Cruickshank Report (2000) highlighted the potential for market power issues where bank concentration could lead to more expensive credit. Because of the many risk factors influencing the cost of credit, it is difficult to establish whether differences in pricing is a consequence of risk or is due to differential pricing practices among lenders. In this study, we find that even when risk factors are taken into account, considerable variation in pricing among UK lenders remains. Moreover, the lenders with the largest market share in SME finance over the 8 years surveyed, charged significantly higher interest premia.