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The UK is leading the way in crowdfunding and P2P lending as the rest of Europe plays catch-up, says University of Cambridge data

The UK has helped to prompt a boom in European crowdfunding and peer-to-peer (P2P) lending, according to new research from the University of Cambridge’s Judge Business School.

While the UK remained the largest alternative finance market in Europe by far, at €5.6bn (£4.9bn), the rest of Europe began to play catch-up as it grew its own market by 101 per cent, the data from the university’s Centre for Alternative Finance showed.

Though this meant the UK lost market share, senior research manager Tania Ziegler said it was a positive story for the country which was showing signs of consolidation in a maturing market.

“Europe is growing from a much lower base so you are going to see much more rapid growth,” Ziegler said.

“It’s slower growth in the UK but that’s because we have seen consolidation, and the platforms that are active are very strong incumbents. It isn’t much of a worry because it’s a case of Europe catching up.”

Ziegler added that the UK “has been ahead because of innovation and a regulatory regime that has allowed innovation to grow”, which other countries are beginning to learn from.

France came second after the EU in the size of its online alternative finance market at €444m, followed by Germany and the Netherlands. Some of the more surprising rankings included Finland at number four and Georgia at number seven.

Excluding the UK, Estonia ranked first for alternative finance volume per capita for the second year in a row, at €63, followed by Monaco and Georgia.

P2P consumer lending accounted for the largest portion of alternative finance in Europe at 34 per cent, followed by P2P business lending, invoice trading, equity-based crowdfunding and reward-based crowdfunding.

Source: City A.M.

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The UK has the highest number of new business developments in a developed country despite Brexit

  • There were 218,000 new businesses in the UK last year, a 6% rise year-on-year. 
  • Other developed countries saw an average of just a 2% rise. 
  • Crowdfunding and peer-to-peer lending has been credited with this sharp rise in start-ups.

The UK outranked all other major developed economies in terms of the number of businesses established last year, according to figures from accounting group UHY Hacker Young.

It became home to 218,000 more businesses in 2016, a rise of 6% over year-on-year. Meanwhile, other major developed economies including France, Germany, Italy, Japan and the US saw an average 2% rise in number of businesses over the year.

The UK ranked sixth of the 21 countries studied by UHY, behind China, Pakistan, Vietnam, Malta and India. Across all the 21 countries, there was a 7.7% rise in established businesses.

“Enterprise and entrepreneurship in the UK have been gathering pace at impressive speed,” said UHY’s Daniel Hutson.

“As a range of new sources of funding gain traction in the market and the corporation tax burden lightens, the start-up climate is improving, financial pressures are easing and investment for growth is on the cards.”

UHY credited alternative funding sources, such as crowdfunding and peer-to-peer (P2P) lending, with helping to boost the entrepreneurial environment. The Conservative plan to lower corporation tax to 17 per cent by 2020 may also be helping to attract firms to the UK.

“The figures suggest confidence in the economic outlook, despite Brexit. Whether this is sustainable, given the uncertainties that still surround the ongoing negotiations with the EU, will be something the government will want to watch,” said Hutson.

While the UK had a total of 3.9 million businesses within its borders as of the end of 2016, China — which saw a massive increase of 19% — had 26.1 million.

The US fell in 13th place, with the number of businesses increasing by 2.1% over the year to 11m.

Source: Business Insider

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Pension funds, small businesses boost growth in UK alternative finance

LONDON (Reuters) – Britain’s alternative finance market grew by 43 percent in 2016, research showed on Friday, with interest from start-ups, small businesses and institutional investors helping to boost demand for services such as crowdfunding and peer-to-peer lending.

Last year, 4.6 billion pounds ($6.2 billion) was raised through alternative channels, up from 3.2 billion pounds in 2015, according to a survey of 8,300 investors and 77 crowdfunding or peer-to-peer platforms.

“Alternative finance has entered the mainstream and is likely here to stay,” said Byran Zhang, executive director of the Cambridge Centre for Alternative Finance (CCAF) at the university’s Judge Business School, which conducted the survey.

Approximately 72 percent of the year’s market volume, or 3.3 billion pounds, was driven by demand from start-ups and small businesses. That was up from 50 percent the year before.

 Peer-to-peer business lending was the largest market segment in 2016, growing by 36 percent to 1.23 billion pounds, providing an equivalent of 15 percent of all new loans lent to small businesses by UK banks.

Major banks reined in their lending in the wake of the financial crisis, and many small businesses complain of poor treatment and difficulty accessing funds.

Several alternative finance providers have sprung up to try to fill the gap, such as peer-to-peer lender Funding Circle, which announced this week it had lent more than 3 billion pounds to almost 40,000 businesses since its launch in 2010.

Another, MarketInvoice, offers peer-to-peer loans secured against businesses’ invoices and has lent 1.7 billion pounds since 2011.

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After peer-to-peer business lending, the biggest categories were peer-to-peer consumer lending, peer-to-peer property lending, invoice trading, equity-based crowdfunding, real-estate crowdfunding and reward-based crowdfunding.

Institutional investors including pension funds, asset managers and banks were also increasingly backing the platforms, the survey showed. Funding from these sources accounted for 34 percent of peer-to-peer property lending, 28 percent of peer-to-peer business lending and 32 percent of peer-to-peer consumer lending.

 Peer-to-peer lending can offer relatively high returns. Funding Circle, for example, currently boasts an all-time average annual return of 6.6 percent.

But the sector’s fast growth has also caught the attention of the Financial Conduct Authority, which is looking at introducing new regulation for the sector, highlighting concerns about past loan losses and due diligence.

This week, peer-to-peer lender RateSetter, the UK’s third-largest, reported a pretax loss of 23.7 million pounds after it took a hit from a bad loan.

Source: UK Reuters