Brexit two years on: The economy, fintech and P2P
Last week marks two years since the historic EU referendum, which saw the British people stun pollsters and pundits by returning a 52-48 majority in favour of Brexit. It has underpinned much of our political discourse ever since, and with just nine months to go until the UK officially leaves the European Union, there remains uncertainty about what the future holds for our relationship with the bloc.
Yet, casting aside all the noise, how has the UK economy actually fared over the past two years? And what of the fortunes of fintech, peer-to-peer lending (P2P) and a company like Lending Works – past, present and future?
An initial shock, rate cut and continued growth
Volatility was the story of that eventful Friday morning, with the revelation of the referendum result causing a frenzy within UK and global markets, a plunge in the value of pound sterling by some 15 per cent against major currencies, and the resignation of Prime Minister David Cameron.
A bumpy six weeks left the Bank of England feeling the need to act, as they cut base rates in August 2016 from already-historic lows to just 0.25 per cent. Yet in the months that followed, this loosening of monetary policy came in for criticism from some quarters, with the economy performing considerably better than the gloomy forecasts in the wake of the vote. In the final quarter of 2016 alone, GDP growth was an impressive 0.6 per cent, the FTSE embarked upon a record-breaking rampage and employment continued to rise.
Mixed economic data since
This pattern was replicated to a lesser extent in 2017, with growth remaining robust, if unspectacular at 1.8 per cent for the year. The stock market continued to flourish, and unemployment fell to levels not seen since 1975. The deficit, too, was recently eliminated for the first time since 2002, suggesting our public finances have turned the corner.
As ever, there was no shortage of headwinds though. Among these were rising inflation beyond the Bank's target of two per cent. Real wage growth also began to decline, falling behind inflation in early 2017, and remaining in the red for over a year until eventually rising above the CPI in April 2018. Growth for the first quarter of this year also proved to be alarmingly anaemic at just 0.1 per cent.
And while the machine that is British services continued on its merry way, manufacturing has largely failed to deliver the expected boon from a weaker pound, while construction performance has been dismal. The retail sector has also suffered significant woes, with the last six months in particular accounting for a number of established high-street stores.
Nevertheless, Threadneedle Street felt the economy was in good enough shape to hike rates last November (for the first time in a decade), returning the base rate to the pre-referendum level of 0.5 per cent. And while an additional, much-anticipated rate rise last month wasn't to be, there remains optimism that another increase could be on its way in August.
The impact of Brexit on fintech and P2P lending
Fintech has been one of Britain's great strengths in recent years, and a high concentration of these agile firms, both in London and beyond, has been the cornerstone of the trail our country has blazed. As of last August, fintech was estimated to be worth over £7bn per year to the UK economy, with around 65,000 jobs being linked to the sector. And there is nothing to suggest that the Brexit vote has disrupted its inexorable upward curve either, with investment continuing to flow into UK fintechs from the Continent, and vice versa.
However, as revealed in a recent article on Peer-to-Peer Finance News, a survey of 100 London-based tech startups showed that 33 per cent believe there is an insufficient number of skilled workers living within the M25 to fill new vacancies, while 30 per cent of respondents believe this skills shortage has already impacted their growth.
To what extent this is reflected specifically within fintech - and, within that, the peer-to-peer industry - across Britain at a wider level cannot be confirmed. But it is essential that, whatever the outcome of Brexit, these firms are not held back from acquiring the best talent the world has to offer, and are allowed to flourish so they can continue to bring the dynamism and innovation our economy needs.
Brexit and Lending Works
While we think it is vital that good trading terms are established with Brussels (especially within services, which accounts for 80 per cent of GDP and the bulk of our exports), as an agile, online firm who operates entirely within the UK, it is not something which occupies our thoughts to a great extent, other than considering the impact Brexit could have on credit risk of our loan customers.
Furthermore, during the past two years, our platform has soared, with some of our major achievements including clearing the £100 million mark (in terms of loan volume), onboarding a number of new partners, launching our ISA, growing our team and expanding into new loan customer acquisition channels.
Such growth suggests the future is bright for ourselves and P2P, and it is also our belief that Brexit will bring about opportunities. The world is changing at a rapid pace, and the established guards of business and finance can no longer take their places at the top of the tree for granted. Britain is already one of the global leaders in fields such as tech and AI, and nimble, innovative firms like Lending Works are better placed than most to respond to uncertainty - and even play an important role in shaping a new and better future for personal finance and financial services.
So, whatever our politicians do or do not achieve in the ongoing Brexit negotiations, we remain hugely optimistic - both for the future of our platform, and the impact that peer-to-peer lending can have on the UK economy as a whole.
The 2019 ISA season is now in full swing, and it's as good a time as any to focus on financial planning - and, within that, looking ahead to your retirement years to ensure financial security.
The Lifetime ISA (LISA), announced in 2016, would prove to be one of George Osborne’s last flagship gestures to UK savers and investors as Chancellor, eventually launching against a backdrop of anti-climax a year later in April 2017.
Over the last decade, there can be little dispute that the reputation of mainstream banks – and particularly the so-called ‘Big Four’ (HSBC, Barclays, Lloyds and RBS) – is at its lowest ebb.
The peer-to-peer (P2P) lending industry is now regulated by the Financial Conduct Authority (FCA). The regulatory framework has been designed to protect customers and promote effective competition.
Loan underwriting is the process that we undertake to analyse all of the information provided by each loan applicant and their credit file to assess whether or not that applicant meets our minimum loan criteria. As part of that process all data is verified, analysed and summarised to paint a picture of each applicant.
When you earn interest from a regular bank savings account, for example, the bank automatically deducts basic rate tax (currently 20%) before paying your interest. With interest earned from peer-to-peer lending, tax is not deducted automatically so lenders will need to declare their income to HMRC.
As 2018 draws to a close, with our bellies full of Christmas turkey, it's only natural to look back on the past 12 months and reflect. No doubt, it's been a turbulent one economically and politically, and not everyone has had it all their own way.