Ablrate & Brexit 01/07/2016
Keep Calm and ....
The vote by 17 million British people to exit the European Union inevitably caused a shock to the market. Many of my friends in the City just didn’t see it coming and were betting on a remain vote until the results came in from Sunderland, then everything changed.
Whatever your vote was we now have to look forward and deal with the challenges and opportunities we are faced with. I am not going to get into the politics of the vote or its aftermath as I am sure we will all be hearing more of that in the coming weeks, what we are looking at is the affect on our industry and lenders. Here are just a few of our thoughts:
1. The markets – Many of us have backgrounds in the financial markets and have been asked endlessly what we thought would happen under a Brexit. From my perspective we all know that the wider markets hate uncertainty, but the speculators love it. It is tough to make money in a flat market so speculators will have been salivating at the swings in equities and currencies. So it was obvious we would take a hit on the FTSE, but many shares pay decent dividends and in a low yield market these shares were never going to stay down for too long… and now we are above where we were before the vote. So I am not too concerned with the stock market. Sure it will affect some business, but for other Brexit is a very big win…. what you lose on the roundabouts you gain on the swings.
2. Sterling – Sterling has traded from 1.55 to 1.40 in the last year, so 1.32 is painful and it probably has some more to go before it gets better. It helps exporters and those who have assets in Dollars, but is not much fun if you are an importer or are going on your holidays. As discussed things may get worse before they get better, but again, there is a huge amount of speculative trading going on and perhaps the rate we at now does not reflect where we really are. (EDIT: We are back up to 1.34 as of 21/09/17)
3. The peer lending market in general – Inevitably there may be a hit on cash inflows while there is uncertainty around, but the opportunities are there also. With only 12% (or 17% depending on who you believe) of UK businesses trading with Europe there is a massive opportunity for British SME businesses to grow without the shackles of European regulation (subject to the new government not giving this away in the name of ‘free trade’ with Europe). That opportunity for British businesses is an opportunity for the peer lending market to grow and service the needs of those business. Would the status quo have been best? Probably, but fortune favours the brave and I have every confidence in Britain’s businesses to make the most of the opportunities ahead.
4. Ablrate – Our expansion plans have not included Europe for a specific ‘European Platform’ and if we had this would probably be on hold. We think, however, that growth is out in Asia. With our platform launching in Singapore and Australia we feel that a UK platform servicing customer here and the other two covering Asia is a model that we can run with.
People will still need their waste recycling, beer will still be put in bottles, passenger will continue to travel, people will still property to live in, modular units will still be needed by businesses, cars will still be bought and sold, waste-to-energy is still a great technology, SME’s will still borrower money, people will still drink in bars and water will still be required by businesses. As that covers pretty much all our loans, we are optimistic.
Overall its business as usual for us. Having completed over £2 million in the last quarter and with a healthy pipeline and institutional support we are confident that despite Brexit uncertainty that this year, and the comings years, will be successful and will certainly be an adventure for us all.