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.
A survey of MPs conducted by the Association of Accounting Technicians and the Association of Chartered Certified Accountants has found 35% of them fear that businesses are not adequately prepared for new tax reporting rules, known as Making Tax Digital. Critics argues that HMRC has pushed through the changes at a time when self-employed people are preparing their business for Brexit. Separate research from QuickBooks found that 18% of small businesses, equivalent to more than 200,000 firms, were not even aware of the new requirements.
The Daily Telegraph
The Government’ Making Tax Digital programme could see small businesses spend £3.3bn on advice, fees and new software enabling them to file the VAT returns online. The Federation of Small Businesses says the average company is expected to be landed with a £2,770 bill for the changes. An HMRC spokesman called the FSB figure “child's maths”, saying the true sum was closer to £37m, or an average of £31 a year for each business.
The Daily Telegraph, Daily Mail: NACFB Morning Briefing - Monday 4th March 2019
Zopa’s recent survey shows that 48% respondents would give up their bonus in return for a 4 day week, that 65% of employees feel overworked and only 24% feel loyal to their company.
These findings broadly reflect those in a 64,000 respondent survey of Federal Workers in the USA. Here, 75-80% of workers who participate in a work-life balance program were more likely to be satisfied with their jobs. The data shows that a good work life balance drives productivity and employee engagement by 21% with many finding that working from home for a few days a week, away from distractions is more constructive.
As the data in the new survey shows, work-life balance practices make everyone’s jobs easier, managers to staff.
http://www.p2pfinancenews.co.uk/2019/02/21/zopa-work-life-balance/
https://www.worktolive.info/blog/major-survey-on-work-life-balance-shows-it-boosts-performance-
P2P lending company Zopa, has conducted some research on the knowledge of investors in Cash ISAs and has discovered that a staggering 30% have no idea of the interest rates they are receiving. But according to the latest Moneyfacts data, the average cash ISA return was just 1.14 per cent in January, while inflation was 1.9 per cent during the same month.
“People need to get their money moving and working harder, and for many that could mean switching out their lower yielding cash ISA for a higher returning IFISA, albeit with slightly more risk.” said Natasha Wear, Zopa’s investment product expert.
http://www.p2pfinancenews.co.uk/2019/02/20/zopa-warns-savers-on-hidden-cash-isa-losses/
IFISAs uptake last year rose by 700% but many are put off by the fact that, while their cash ISA is covered by the Financial Services Compensation scheme, the same does not apply to IFISAs. So the question is, how safe are they?
Some P2P companies are putting their companies through stress-testing in much the same way that banks are obliged to do. At the moment, this is not a stipulation of the FSC, but some, like Funding Circle believe that it will give comfort to potential investors if they can see that the platform they invest with will be capable of withstanding a possible downturn in the economy, or a rise in interest rates.
As the market matures, P2P platforms will be able to prove themselves and investors can take comfort in solid track records. As with any investment, the key is to spread your risk, don’t keep all your eggs in one basket, but to put your money where you know the rate given is less than inflation is surely a route to loss.
http://www.p2pfinancenews.co.uk/2019/02/20/should-bank-style-stress-tests-for-p2p-lenders-reassure-investors/
IFISAs are growing in uptake. 2017 to 2018 saw subscriptions of over £290 million over 31,000 accounts. By August, it was reported that the Big 3 (who were a little later to the game than other platforms) were raising the profile and boosting customer confidence in the new product. Zopa had attracted over £150 million and Funding circle, over £120 million. Because they were a little later in gaining FCA authority, they were then delayed in offering IFISAs but it is generally agreed that their entrance is creating a buzz of respectability. “The entry of Zopa, Funding Circle and RateSetter definitely helps raise awareness,” Frazer Fearnhead, founder of P2P property lender The House Crowd, says.
The big players insist they are helping everyone and that the competition is against cash and stocks and shares ISAs rather than with each other.
“The initial success of the IFISA proves there’s clearly plenty of demand amongst investors for an alternative to the lower-yielding cash ISA and the highly volatile stocks and shares ISA,” Natasha Wear, head of investment products for Zopa, said.
(http://www.p2pfinancenews.co.uk/2019/02/08/ifisa-plenty-to-play-for/)
MoneyThing lenders have been repaid the capital and interest on 3 stocking loans today. The loans were taken out to increase stock and therefore give customers a better choice of vehicles. This particular borrower has been a client of MoneyThing since 2015 and their loans have always been popular with lenders as it brought them a steady 12% return on their money.