News around the Brexit is invariably doom laden, but do the facts stack up?
In December, it was reported by the Office for National Statistics (ONS), that the UK remained a top destination for foreign investment, with investment increasing by 12.6% in the previous year.
The value of the UK’s foreign direct investment (FDI) rose by £149bn to £1.3bn in 2017. The Department of International Trade said this was the highest level of inward stock since records began. The department welcomed the news that the greatest growth from any country came from Indian investors, rising 321% to £8bn. Stocks from Asia totalled £128bn, with investment from Japan increasing 71% to £78bn. (https://economia.icaew.com/news/december-2018/foreign-investment-in-uk-highest-level)
But in contrast to that, in 2018, unsecured consumer lending fell at its fastest rate in five years, as Brits scaled back their spending amid Brexit uncertainty. And the Insolvency Service recently revealed that personal insolvencies rose by 16.2 per cent last year, while Individual Voluntary Arrangements were at the highest annual level ever recorded.
But there maybe a possible silver lining. If the economy worsens, traditional lenders are likely to take a more conservative ‘wait and see’ approach to their lending businesses. In the 10 years since the global financial crisis, we have seen this in action as banks tighten up their lending requirements and scale back SME funding. At the same time low interest rates have left many savers struggling to match the rate of inflation. This could create an opportunity for alternative lenders to step in and offer funding to UK businesses, while also allowing frustrated savers to make inflation-busting returns.
Furthermore, the P2P sector has been working hard to manage default risks by using extensive credit checks, provision funds, pooled loans and ‘skin in the game’ lending models. If anyone can make the most of a bad macro-economic situation, it’s alternative lenders. Their challenge will be to convince worried investors that they are up to the task.
Whichever way you read it, there are options and there will be solutions. The wider world seems to view GB Inc. positively even if we at home don’t. Take your Brexit news with a pinch of cynicism and make your own decisions.
Parts of this article featured in the March edition of Peer2Peer Finance News.