Marketing No Comments

FCA threatens clampdown on P2P lending

Regulators are considering making peer-to-peer lending and crowdfunding less accessible to investors who aren’t professional or very rich, says David Stevenson.

Can you be trusted to be a sensible investor? The Financial Conduct Authority (FCA) has been pondering whether investors looking to put some money to work in alternative finance are capable of making sensible and informed decisions about the range of products on offer. If they can’t, should their cash be channelled into more open, transparent, mass-market products, such as unit or investment trusts or exchange-traded funds?

I realise this all sounds a bit policy-wonkish, but when it comes to the world of alternative finance, especially peer-to-peer (P2P) lending, this regulatory attitude may be about to have a direct impact on your investments. A few weeks ago, the FCA produced a consultation paper entitled “Loan-based (‘peer-to-peer’) and investment-based crowdfunding platforms: feedback on our post-implementation review and proposed changes to the regulatory framework”.

These fussy new rules…

Most of the suggestions in the paper are good old-fashioned common sense, designed to make P2P lending more mainstream and less risky. But one key proposal stands out like a sore thumb. The regulators suggest that future P2P investment “promotions” should only be able to target the following groups: those certified or self-certified as sophisticated investors, those certified as high net worth investors, those under advisement from an authorised person, and those who certify they will not invest more than 10% of their net investable portfolio in P2P agreements.

So, to be clear, in the future, if you are a new customer at, say, Zopa, Ratesetter or Funding Circle looking to bolster your income, you’ll have to prove you are independently wealthy or a finance professional, or certify that you only have 10% of your portfolio in online lending.

The reaction of many experienced private investors has been negative, to put it mildly. The industry website www.altfi.com, of which I am an executive director, asked for views. M. Thomas said the FCA “has once again demonstrated its antipathy towards individual… investors and the original spirit of P2P (to cut out the middleman)… these FCA proposals demonstrate a nanny-state mentality – people must be protected against themselves”.

Another unnamed pensioner added that “as a former company director, I’m well able to decide for myself what investments I make, and have no plans to reduce my current level of P2P lending (30% of my total). The FCA may wish to reflect on the fact that had its predecessor been rather better at monitoring the activities of Equitable Life, many of us would now have less need to consider some higher-risk investments in our retirement.”

…wouldn’t work

Many investors I’ve talked to with an interest in alternative finance are deeply troubled. Most simply intend to ignore the changes, even if they come in. And that, of course, is the real problem with any form of regulatory overreach. The intended beneficiaries simply ignore the good intentions and just fib and say whatever the regulator wants to hear. Witness the world of stockbroking, where investors already have to self-certify if they want to deal in securitised options such as covered warrants. Most retail stockbrokers send out pointless forms asking all the right questions about attitudes to risk. Most of them know full well that investors who sign the forms aren’t entirely truthful but connive in the charade.

But even if these changes were easy to apply, I’m not convinced they are fair. Is P2P really that risky? In effect, the regulators are saying online lending is as risky as, say, crowdfunding. With all due respect to successful crowdfunding platforms such as Seedrs and Crowdcube, the risk from investing in start-ups is immeasurably higher than that from lending to consumers or even established small companies with clear credit track records. With the former, most experienced investors are used to the idea that a large proportion of their investee companies won’t make it. With online lending, most credit investors (institutions are active in this space) don’t expect losses to exceed 5%-10%, even in the worst years.

Even if policymakers are worried about risk, there is a better way of managing this downside – sharper, smarter regulation. Or as Rhydian Lewis of P2P lending platform Ratesetter puts it, rather than block access, why not “eliminate the high-risk elements of P2P lending and… keep it accessible”? Wouldn’t it be better to close down rubbish platforms, force through far greater transparency about risks and impose heavy penalties for rule-breakers? Why should the wealthy or financial professionals be the only ones to benefit from an alternative to the lacklustre yields on offer at high-street savings institutions – most of which haven’t even passed on the recent increase in the Bank of England base interest rate?

Source: Money Week

Marketing No Comments

New rules for peer-to-peer lending announced by FCA

The popularity of peer-to-peer (P2P) lending has increased exponentially in recent years, with nearly £10 billion being transferred through such platforms in the past ten years. In an attempt to fix “increasingly complex business structures”, the FCA has announced new plans for new rules for peer-to-peer (P2P) lending.

The FCA has announced new plans which will see a crackdown on P2P lending and the loan-based crowdfunding industry in general following concerns that consumers are at risk of investing in things they do not understand.

P2P lending was last reviewed by the FCA in December 2016, announcing at the time, its plans to address the gap in protections for customers. Since then it has monitored the situation and noted the variety of loan-based crowdfunding business models, of which some are becoming increasingly complex. Whilst the FCA regulates loan-based crowdfunding (also known as P2P lending) and investment-based crowdfunding (which falls outside of the FCA’s present review), the FCA does not regulate donation-based or reward-based crowdfunding (hence, both of these fall outside of the FCA’s review).

As part of its ongoing monitoring, the FCA has also noted poor practice among some firms in the crowdfunding industry. The proposals detailed below aim to improve standards in the sector whilst still leaving scope for further innovation.

The consultation is aimed at establishing views on the following proposals:

  • Proposals to ensure investors receive clear and accurate information about a potential investment and understand the risks involved
  • Ensure investors are adequately remunerated for the risk they are taking
  • Transparent and robust systems for assessing the risk, value and price of loans, and fair/transparent charges to investors
  • Promote good governance and orderly business practices
  • Proposals to extend existing marketing restrictions for investment-based crowdfunding platforms to loan-based platforms

Executive director of strategy and competition for the FCA, Christopher Woolard has stated that: “The changes we’re proposing are about ensuring sustainable development of the market and appropriate consumer protections. We believe that loan-based crowdfunding can play a valuable role in providing finance to small businesses and individuals but it’s essential that regulation stays up to date as markets develop.”

Equally, the FCA was keen to ensure that not all P2P lenders were criticised, noting that some “P2P platforms already have more robust systems and controls in place”.

The new proposals will also see tighter provisions when alternative funding is used for home loans. The FCA will seek to enforce its Mortgage and Home Finance: Conduct of Business rules on P2P platforms if they begin to deal in the residential lending market.

The FCA is asking for responses to the consultation by 27 October 2018 before it publishes rules in a Policy Statement later this year.

Source: Lexology

lending
Marketing No Comments

Tougher P2P lending rules proposed over poor practice concerns

The city watchdog has proposed a number of measures to tighten up control of the peer-to-peer lending sector following concerns about poor practice and potential risks to investors.

The Financial Conduct Authority (FCA) has opened a consultation on loan-based crowdfunding platforms (peer-to-peer) following its original review of the sector in 2016.

It said since then, it’s observed that the new and growing area has become increasingly complex and has found evidence of “poor business practices” that could cause actual or potential harm to investors.

For example, P2P platforms have a much more active role by taking decisions on behalf of investors, structuring the loans they’re exposed to, and splitting loans across a number of investors (lenders) in order to receive a target rate of return.

Given the focus on headline rates, investors may not be aware of the exact level of risk they’re being exposed to. Further, the FCA said investors may not be receiving full information on charging structures, wind-down arrangements and record keeping.

Customers may also be buying unsuitable products, may be receiving poor treatment, may not be remunerated fairly for the level of risk they’re taking, and could be paying excessive costs for a platform’s services.

As a result, it has today proposed the following measures to ensure investors are given clearer information about investments, charges and risk:

  • When a platform advertises a target rate of return, it should be achievable, and for investors to understand and be fairly remunerated for the risks they’re exposed to
  • Where P2P platforms price loans or choose loans on behalf of investors, they need to clarify what systems and controls are in place to support the outcomes advertised
  • Strengthening rules on plans for the wind-down of P2P platforms, such as for the IT infrastructure to continue for the benefit of investors.

Christopher Woolard, executive director of strategy and competition at the FCA, said: “When we introduced new rules for crowdfunding, we said we’d review the market as it developed. We believe that loan-based crowdfunding can play a valuable role in providing finance to small businesses and individuals but it’s essential that regulation stays up-to-date as markets develop.

“The changes we’re proposing are about ensuring sustainable development of the market and appropriate consumer protections.”

The consultation closes on 27 October and the FCA expects to publish the new rules later this year.

Source: Your Money
key 2114044 960 720
Marketing No Comments

Peer-to-peer property loans platform Lendy gains authorisation from City watchdog

Property funding platform Lendy has gained authorisation from the Financial Conduct Authority, in a move which will pave the way for regulated products.

The authorisation could open the way for products such as an innovative finance individual savings account (Isa), which allows savers Britons to earn tax-free income from peer-to-peer lending.

Lendy, which launched in 2012, provides bridging and development finance to property firms, with loans sourced from a peer-to-peer platform.

The firm says is has so far facilitated more than £400m in lending, with 21,500 registered investors. The firm will continue its new investments alongside new investment products, its said.

Liam Brooke, Lendy chief executive, said the “long and sometimes challenging journey” to authorisation has “helped us mature into a stronger and more robust business”.

“This is a validation of our efforts to move from a young start-up to an established mainstream lender, with the ability to disrupt the banking model for the benefit of clients, and design new investment products and services.”

Peer-to-peer lending has boomed in recent years as online platforms have reduced the cost of accessing finance from multiple retail investors, while investors have also been attracted by the relatively high yields on offer particularly in the property space.

Brooke added that he believes Lendy has helped fund property developments which “wouldn’t have been delivered otherwise”.

He said: “This kind of finance is critical to tackling the UK’s housing shortfall, with house building now at its lowest rate since the second world war.”

Source: City A.M.

money 2724235 960 720
Marketing No Comments

P2P platform Lendy tops £400m funding

Peer to peer secured property lending platform, Lendy, has broken the £400 million barrier in financing UK property market.

Lendy’s latest milestone comes as some banks pare back their lending and more property developers seek out alternative finance options.

The firm reached £300 million in lending in April last year and has funded hundreds of bridging and commercial property development loans since its launch in 2012. These include residential developments, commercial property, and conversions.

The £400 million has been invested by over 21,500 investors who have earned more than £40 million in interest so far.

Lendy says one of the keys to its success has been the level of due diligence it carries out, such as its property valuations are always carried out by RICS registered property valuers.

Property developers are turning to alternative forms of finance such as P2P thanks to quick turnarounds and availability. Lendy can move from an initial offer to drawdown of the loan in days, in sharp contrast to the months that can be taken by banks’ credit committees. It is also often able to offer loans secured against properties that the banks would be unable to value confidently.

Lendy’s large and growing user base allows it to fund loans of any size extremely quickly, with loans often oversubscribed by up to five times.

Investors

Lendy also continues to see strong growth in its investor base, which is attracted to the platform for a number of reasons.

It has a four-step due diligence process, undertaken by an in-house team, and panels of major law firms and valuers. All loans are secured against UK property lending at a maximum LTV of 70%. Lendy says that returns to investors are between 7% and 12% a year and the minimum investment is just £1.

Liam Brooke, CEO of Lendy, commented: “For some time, we have been stepping in where big banks have neglected property developers. With banks set to limit their property lending even further – we are ready to help fill the funding gap.”

“To pass the £400 million barrier in a little over a year after reaching £300 million is testament to the relationship we have with developers and the quality of the loans we provide.”

“A combination of quick turnarounds for developers, coupled with good returns and excellent due diligence on properties for our investors, is helping Lendy grow at a healthy rate.”

Source: Mortgage Finance Gazette

piggy 2889043 960 720
Marketing No Comments

An introduction to crowdfunding

Crowdfunding is an increasingly popular alternative method of raising finance. But what is crowdfunding? In this article we explain how crowdfunding works, the risks and rewards and the UK regulation.

What is crowdfunding?

Crowdfunding is the practice of raising money from a large number of individuals for the purposes of financing a project, venture, business or cause. Traditionally, crowdfunding has been carried out via subscriptions, benefit events and door-to-door fundraising. However, today the term is typically associated with raising money through website platforms, which allows crowdfunding to reach a larger pool of potential funders.

How does crowdfunding work?

Crowdfunding usually takes place on a light-touch online platform rather than through banks, charities or stock exchanges. The business or individual seeking finance will typically produce a pitch for their business, project or venture, which is then uploaded to the online platform with the aim of attracting as many loans, contributions and investments as possible. Websites such as Kickstarter, Seedrs and Crowdcube are examples of the available online platforms, which enable project initiators to reach a pool of thousands, if not millions, of potential funders.

What are the different types of crowdfunding?

Crowdfunding can broadly be split into four main categories:

  1. Loan-based: also known as peer-to-peer lending (P2P), this involves individuals lending to businesses or other individuals in return for interest payments and a repayment of capital over time.
  2. Investment-based: individuals invest directly or indirectly in new or established businesses by buying investments such as shares, debt securities or units in an investment scheme.
  3. Donation-based: people give money to individuals, organisations or enterprises they want to support, with no expectation of any return on their investment.
  4. Pre-payment or rewards-based: individuals give money to receive a reward, product or service (for example, concert tickets, artwork, a new product etc.).

In addition, less-common forms of crowdfunding exist whereby funders invest in order to receive, for example, software value tokens (see A guide to initial coin offerings) or a share of the compensation from the results of litigation.

Crowdfunding examples

Crowdfunding’s success is not just limited to industry – it has been used to successfully raise funds for a range of not-for-profit organisations and charitable causes. Children’s charity, Kids Company, successfully raised over £100,000 in under two months in 2014/15 with their campaign on the platform Crowdfunder. In 2016, crowdfunding campaigns raised £12.3 million on the platform JustGiving, a platform for online charitable donations.

That said, businesses are also benefiting from crowdfunding initiatives. Starting in 2007 as a two-man partnership, BrewDog successfully crowdfunded their way (using an equity-based platform) through year-on-year growth to become an international company valued at circa £1 billion in 2017. Perkbox, a cloud-based employee perks and engagement platform for businesses, raised circa £4.3 million with its campaign on Seedrs. Finally, in 2016 Crowdcube raised circa £6.7 million, effectively making the crowdfunding platform its own biggest success story.

How is crowdfunding regulated?

In the UK only certain crowdfunding activities are regulated. Donation-based and rewards-based crowdfunding are not regulated, whereas firms carrying on activities associated with loan-based or investment-based crowdfunding may require FCA authorisation under the Financial Services and Markets Act 2000 (FSMA). Accordingly, what follows is a high-level summary of the regulation of both loan-based and investment-based crowdfunding in the UK.

Loan-based crowdfunding

The platforms

In 2013, with loan-based crowdfunding becoming an increasingly popular means of raising money and recognising that it was difficult to regulate the practice under existing regulatory provisions, the FCA took the step of adding a new activity, at article 36H, to the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (SI 2001/544) (RAO).

Under article 36H of the RAO, loan-based crowdfunding became regulated as the “activity of operating an electronic system in relation to lending“. Under this provision, online platforms facilitating loan-based crowdfunding between two individuals or between individuals and businesses will be carrying on a regulated activity and will, therefore, require FCA authorisation (unless certain exemptions, such as for charities or appointed representatives apply).

Regulated platforms will be required under the FCA rules to comply with certain consumer protections around the clear disclosure of information and the protection of customer funds.

The participants

Generally speaking, where the borrower is an individual (or a partnership or unincorporated body of individuals), and the investor is lending in the course of a business, the terms upon which the loan is made may constitute a regulated credit agreement and consequently be subject to the full requirements of the Consumer Credit Act 1974 (CCA). The investor will then need appropriate FCA authorisations for the provision of consumer credit and will be required to comply with the relevant rules in the FCA Handbook (CONC in particular). To help with this, the FCA has published a webpage, which provides a useful summary of the key provisions of the FCA Handbook that apply to loan-based crowdfunding firms.

Where the investor is not acting in the course of business, so that the agreement is a non-commercial agreement under the CCA the investor will not require FCA authorisation. There are, however, additional obligations on the operators of the platforms in CONC to help protect consumers from some of the risks associated with these non-commercial agreements.

Participants acting by way of business should also take care not to inadvertently carry out other regulated activities when crowdfunding. In this context, the FCA has warned that businesses which borrow through a crowdfunding platform with a view to lending this to other individuals may be carrying out the regulated activity of accepting deposits – which will require additional authorisation.

Investment-based crowdfunding

The FCA regards investment-based crowdfunding as a high-risk investment activity, with the potential for capital losses. This is likely due to the fact that the instruments traded on such investment-based crowdfunding platforms are non-readily realisable securities that are not listed on regulated stock markets and are instead traded over the internet and via other means.

The platforms

Unlike the bespoke regulatory rules for loan-based crowdfunding, activities associated with investment-based crowdfunding platforms typically fall under the existing rules, including article 25 of the RAO which covers both arranging deals in investments and making arrangements with a view to participating in deals in investments. Accordingly, online platforms facilitating investment-based crowdfunding are likely to be carrying on a regulated activity and therefore require FCA authorisation.

While the FCA has not published a webpage summarising the FCA Handbook provisions applicable to investment-based crowdfunding, it is thought that many of the provisions applicable to loan-based crowdfunding will be relevant to investment-based crowdfunding.

The FCA introduced further rules around financial promotions applicable to firms operating investment-based crowdfunding platforms in 2014. As a result, such firms may only make direct offer financial promotions to retail clients if such clients either:

  • have taken regulated advice
  • are high net worth or sophisticated investors (as defined in the COBS provisions of the FCA Handbook)
  • have confirmed that they will invest less than 10% of their net assets in the relevant investment.

Regulated platform operators must also be able to assess whether retail clients understand the risks involved with investing if they do not take regulated advice – the FCA expects this to be done as part of the online registration process for the platform.

The participants

Businesses buying and selling investments through crowdfunding platforms should take care not to accidentally fall within the UK’s regulated activities and financial promotions regime. In particular, businesses contemplating raising equity finance via investment-based crowdfunding platforms should be careful not to fall foul of the restriction on offers to the public under section 755 of the Companies Act 2006. For more information on the implications of this legislation on investment-based crowdfunding, see our previous article Crowdfunding: restriction on ‘offers to the public’.

How is regulation likely to change/develop in the future?

In December 2016, the FCA published a feedback statement (FS16/13) in response to their previous call for input to the post-implementation of their crowdfunding rules. Following the publication of the feedback statement, the FCA has indicated that it intends to consult on, among other things, additional requirements relating to wind-down plans, cross-investment of loans on different loan-based crowdfunding platforms and mortgage lending standards where the investor is not lending by way of business.

In addition, the FCA has raised concerns regarding the quality of communications with potential investors on loan-based and investment-based crowdfunding platforms. Accordingly, it intends to consult on more prescriptive rules in respect of financial promotions and the content and timing of disclosures.

What is the UKFCA code of conduct?

The UK Crowdfunding Association (UKCFA) is a self-regulatory body that was set up in 2013 with the purpose of promoting the interests of crowdfunding platforms, their investors, and clients. Members of the UKCFA are required to agree to the code of conduct which, among other things, promotes and implements transparency, security, appropriate safeguards and compliance with applicable laws and regulations.

What are the benefits of crowdfunding?

Investors

  • Involvement – investors may find it rewarding to be involved in the development of a specific business, project, venture or cause. Crowdfunding enables potential funders to choose how they invest their money more freely.
  • Returns – crowdfunding may offer investors higher returns than those available from other, more traditional, financial products.
  • Costs – by obviating the need for various intermediaries such as brokers, investors may receive benefits via reduced search and transaction costs.

Borrowers

  • Accessibility – crowdfunding enables borrowers to access finance where it may not necessarily have been available to them from banks or other institutional lenders.
  • Numbers – crowdfunding enables individuals and businesses to receive finance from a potentially unlimited pool of investors and with relatively low associated access costs.
  • Exposure – raising finance via crowdfunding provides borrowers with significant exposure may help to raise the borrower’s profile and provides them with free access to market feedback.

What are the risks of crowdfunding?

Investors

  • Information asymmetry – potential funders may face the problem of information asymmetry and find that they lack the ability to conduct proper due diligence on the borrower.
  • FSCS – investment via crowdfunding platforms does not provide the investor with any access to the government’s Financial Services Compensation Scheme, which may leave the investor with no access to compensation in the event that the borrower becomes insolvent.
  • Liquidity – due to the lack of any established secondary market for crowdfunded investments, investors may find it difficult, if not impossible, to cash-out their investment.
  • Start-ups – many borrowers on crowdfunding platforms are start-ups or businesses in the early stages of their development. There is a significant risk that the borrower business will fail, resulting in a capital loss to the investor.
  • Shares – it is unlikely that shares issued on crowdfunding platforms will carry any associated voting rights or rights to dividends for the investor. In addition, the value of any investment many be significantly diluted if more shares are issued.

Borrowers

  • Reputation – whether through lack of experience or time-pressures, borrowers may fail to achieve their proposed goals set out in their initial pitch. This may result in irreversible reputational damage to their business and the borrower’s public support.
  • Intellectual Property – in order to receive public backing, borrowers may find that they have to make a trade-off between producing a detailed and thorough initial pitch and exposing designs or products that have not yet been properly protected.
  • Management – successful crowdfunding campaigns may result in a borrower having to manage a large number of investor’s expectations, demands and investments. Without the appropriate resources, borrowers may struggle to successfully carry out this task.

Source: Lexology

nature 3116798 960 720
Marketing No Comments

How P2P could be a financial lifeline for UK landowners

Landowners and farmers are set to be among the hardest hit workers as Britain negotiates its way out of the EU. However, access to funding through a peer-to-peer (P2P) platform could provide a valuable form of finance so that farmers can grow, diversify or refinance amid the uncertainty of Brexit.

A recent study of 172 farms by the Prince’s Farm Resilience Programme found that just 16% made a profit from their farming activities over the period assessed. The analysis found that instead many farms are now reliant on alternative income streams to turn a profit, such as tourism, renewable energy and selling their products directly to consumers.

But moving into alternative areas of business requires capital. And – with the average farm in the study making a loss of more than £20,000 from its farming activities – it may be capital that landowners require to invest in their business to prevent a loss.

P2P lending could be a lifeline to the UK farming industry. It allows landowners to raise much-needed funds to help diversify their business. Meanwhile, local lenders can enjoy the produce and services their money has contributed towards creating.

The farming industry has already had to tackle a number of significant challenges in recent years. Supermarket giants have squeezed profit margins and demanded ever-increasing output levels.

It’s estimated that the number of dairy farmers has more than halved over the past decade, unable to keep up with cost cuts. A survey by the National Farmers’ Union last year found confidence among farmers on the outlook over the next three years had plunged. A recent report by the Agriculture and Horticulture Development Board (AHDB) estimated that the average farm could see its income more than halved after Brexit.

EU subsidies have provided a much-needed boon to many farms. Leaving the EU will likely leave a major gap in many farms’ balance sheets and local lending could provide the plug many farmers may require.

Many small businesses are turning away from the high street lenders when they are looking for funding or finding banks unwilling to lend to them. At the same time, many investors are looking for a more social and sustainable way to earn interest on their cash. It is estimated that in 2015 some 12% of lending to small- and medium-sized businesses came through P2P platforms and the proportion is only growing.

The appeal is easy to see: investing money in local businesses means not only do lenders have the chance to earn an inflation-beating rate of interest, but they can also see exactly how their cash is being used within their local communities.

Folk2Folk champions local lending because we believe in creating financially and socially sustainable communities by matching local businesses with local lenders. With headquarters in Cornwall and hubs across the UK in rural communities, we’re well aware of the importance and impact landowners and farmers have on their local communities, and all the challenges and opportunities they face during the Brexit transition.

Source: Bridging and Commercial

piggy 2889043 960 720
Marketing No Comments

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.

plant 2798849 960 720
Marketing No Comments

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