As the UK gets set to spend its way out of crisis, it is time to bring in alternative finance providers and peer-to-peer lenders around the table.
Yann Murciano is CEO at Blend Network
The government has pulled out its entire arsenal to combat COVID-19: direct giveaways, loan guarantees, tax delays and the entire range of subsidies imaginable in times of downturn.
Now, as the UK gets set to spend its way out of the crisis, it is time to bring in alternative finance providers and peer-to-peer (P2P) lenders around the table. These little-known allies hold the key to the government’s ‘build, build, build’ recovery.
Avoiding austerity
Following on from the unprecedented and co-ordinated responses from governments around the world to the pandemic, it comes as no surprise that public debt burden is set to rise sharply across the developed world over the next few years.
According to research from Capital Economics, gross general government debt as a percentage of GDP is set to rise by an average of 20% over the next few years across developed economies, and it has already become clear that governments have no appetite for austerity and indeed are keen to spend their way out of the crisis.
In the UK, in a bid to boost the financial outlook, Prime Minister Boris Johnson is pledging to put jobs and infrastructure at the centre of his government's economic growth with a commitment to ‘build, build, build’ and has set out plans to accelerate a £5bn spending spree on infrastructure projects.
Against this backdrop, alternative finance providers, and particularly P2P lenders, hold the key to the UK’s ‘build, build, build’ recovery plans.
Peer-to-peer solutions
Lending platforms like Blend Network use technology to offer a way to channel private investors’ savings looking for yield and return into the nation’s housebuilding efforts. Having emerged a decade ago in the aftermath of the Global Financial Crisis, P2P lending platforms have consolidated their position at the heart of the mainstream financial ecosystem and proven to be a trusted partner to traditional banks and lending institutions.
Furthermore, peer-to-peer lenders have mostly emerged strengthened out of the COVID-19 crisis. For example, we at Blend Network were able to successfully fund our two largest ever property loans in the UK during May and June.
The first, a £2,250,000 total lending facility, was a loan to refinance the existing facility and complete the conversion of an existing office into 30 flats in Great Yarmouth. The borrower, a very experienced property developer, had already completed Phase I of the project consisting of 15 apartments and now intends to start Phase II of the scheme.
The second, a £1,950,000 total lending facility, was a loan to refinance the acquisition and start the redevelopment of an office building in Stafford into 27 apartments.
Both of Blend Network’s loans were funded by hundreds of lenders, which demonstrates investors’ appetite for supporting the UK’s housebuilding efforts, and P2P platforms’ ability to successfully and efficiently channel much-needed funding into the sector.
Bringing progress forward
I believe this crisis, like other crisis, has not created a new trend, but has accelerated trends that were already in place and moved them along faster.
Alternative finance and peer-to-peer lending were already in the process of becoming key players within the broader financial ecosystem, and now the time is ripe for P2P platforms to show their worth and support the Prime Minister and his government’s vision for a ‘leveled-up’ Britain.
To me, there is no question that following the current crisis we will see more alternative finance, including peer-to-peer lending as borrowers gain more trust and confidence in the sector and remember those lenders who stuck by them when things were tough.
