January 2020
By Adam Tavener, CEO at Pension Led Funding
Writing this with storm Brendan buffeting trees and buildings outside I cannot help wondering whether the weather is giving us a metaphorical hint as to what the year ahead might hold. Certainly, there are some significant challenges ahead, but, truth be told I am more of a glass half full type of guy who tends to regard change and challenges as opportunities rather than problems.
First up we have to get on with Brexit. Mercifully the deadlock is now over, much to the relief of pretty much everyone, viewpoints notwithstanding, so the government can get on with its day job of running the country. I do believe that the process of withdrawal may well lead to a tightening of criteria from the main banks, meaning the role of intermediaries in sourcing non bank finance for SME’s will become increasingly important.
Such circumstances offer the opportunity for the alternative finance sector to further embed itself into the core of SME lending. Because of the huge array of non bank funding propositions out there, ranging from Pension-led funding to short term cash flow fixes I suspect that 2020 will be the year that the intermediary community begins to fully embrace the technology available from aggregator platforms such as our own Funder Finder SaaS product, allowing brokers to profitably transact much smaller deals than would otherwise be commercially viable. This capability to go ‘whole of market’ with a proper compliance trail is likely to be increasingly important as regulation inevitably increases its grip of the sector.
It’s likely that we will see some more consolidation in the P2P market as profitability still eludes most platforms and there is only so long investors will continue to support loss making models. That’s no bad thing as, in reality, there were too many ‘me too’ type entrants into the space without being sufficiently differentiated and with unrealistic expectations of likely market share. Once again, the regulator will have a role in ensuring orderly wind downs occur and that the remaining operators really do understand the importance of consumer protection and reputation to their long term outlook. On the upside the UK Government seems to be committed to diversifying the available sources of credit to SMEs, both through the activities of the British Business Bank and by continuing with the bank referral scheme, which has now secured funding for well over two thousand mostly very small businesses.
Further afield I do believe that President Trump’s trade dispute with China will get sorted which will provide a big boost to world markets and trade, and remove one of the biggest sources of economic uncertainty. Markets also seem to be expecting a further term of office for the President.
A good trade deal and orderly Brexit is a likely outcome I believe, which will likely result in real stimulus for the commercial property sector as overseas investors will recover and, indeed, increase their appetite for investing in British property. This is likely to be good news for the institutional investors, such as pension funds as well.
It is inevitable that the climate and the challenges presented by climate change will become even more central to both government and business thinking but, here as well, the challenge also presents opportunity.
So, in summary, stormy weather outside notwithstanding, I am pretty optimistic about the prospects for the next twelve months.