October 2018
By Colin Sanders, senior consulting underwriter at Merchant Money
The dark clouds of the financial crisis in 2008/2009 left a lasting impact on businesses around the world, and none more so than in the banking sector. They suffered and as a result business suffered, particularly SMEs; we still haven’t seen a full recovery. RBS are still partly in public ownership and the government only sold off the final part of Lloyds as recently as 2017.
Even when fully back on an even keel, it’s unlikely that the major banks will abandon their stance in relation to lending to the SME sector anytime soon. Before that happens (if it happens) we face the uncertainty of Brexit. What will be the implications of the UK leaving the EU? The doom-mongers will tell you we are heading towards a financial precipice. Did I not read in the press very recently that a pint of beer could rise to £10? That there will be a shortage of medicines? Others will tell you that we will be able to make our own decisions, financial or otherwise, without the encumbrance of Brussels. For example, we could release more money to the NHS, according to a chap called Boris!
No one has the answers, but because of the uncertainty, decisions are put on hold – and decisions by major banks have a big impact on UK Plc.
The banks will of course tell you it’s business as usual and has been for some time. If that was the case, why have we seen a virtual explosion in the alternative lending market in recent years? The figures do not lie. In 2015, alternative lenders accounted for injecting £3.25bn into businesses. In 2016, this rose to £4.6bn, and estimates for 2017 are set to exceed £5bn. What’s more, over 75% of this lending was to SMEs.
Brexit is part of it, though. Mr Trump has seen to that with his aggressive “Make America Great Again’’ stance and his trade war with China is at the forefront of his financial planning for the USA. He has implemented tariffs on a number of goods entering the USA, not only for China but for other countries around the world. This will result in tit-for-tat tariffs which will prove damaging to economies around the world. So, we not only have UK/European uncertainty but worldwide uncertainty on the political front.
SMEs are the biggest contributor to the UK economy and (financial) support is crucial in this sector if the UK is to see real growth and prosperity.
We have had 10 years of financial turmoil having a serious impact on economic growth. Let’s hope we don’t have 10 years of political uncertainty doing the same.
One this is for sure; a glass must be raised for the alternative finance market. I’m sure it has eased the financial pressure on a vast number of businesses.