Why unpredictability is a plus for the year ahead

By Faith Sylvia, business development manager

With a new year comes a new host of predictions and expectations. As always, some of these are positive and others more cynical. The last decade has seen incredible and unexpected change within the commercial finance sector, and 2018 is likely to be just as exciting. The Route – Finance, operating within the bourgeoning alternative finance industry, has been in the industry since 2008, and has witnessed these dramatic changes. Looking ahead to the new year, The Route considers some of the potential challenges and opportunities for 2018.

There are a few difficulties lying ahead for those in commercial finance, particularly as the reality of a post-Brexit economy sinks in. One of these is the slowdown in the number of new companies entering the market. As the alternative finance industry, in particular, settles and consolidates, there will be higher barriers to entry and some companies will be pushed out altogether. This trend has come to light with the latest industry report from the Cambridge Centre for Alternative Finance, which states that the top five largest alternative finance platforms represent 64% of the market.

In addition, the UK’s economic growth is predicted to be quite slow, with many projecting a growth rate of just 1-1.5%, which is notably less than projections for other developed economies. This is reflected in the slowing UK property market, with London’s property prices predicted to fall by 2%.

On the other hand, the alternative finance industry continues to grow, albeit at a slower rate; and despite some market consolidation, there is still plenty of competition. The residual effect of the booming growth within the industry over the course of the last few years is the increasingly low rates in many of the products offered in the commercial finance space. In the bridging sector, which hit its peak in 2017, average rates in Q3 2017 were as low as 0.82% per month. It is possible that this trend will continue, making financing more accessible, and keeping the market fairly priced.

And what would a new year be without the promise of smaller and better technology? Continued innovation has completely altered the landscape of commercial finance, and the success of fintech companies has been so big that the banking industry is starting to notice and follow suit. 2018 is sure to see improvements in products and offerings from alternative finance companies as well as the high street.

If the past is any indication, the landscape will be in flux for a while yet, and the commercial finance industry can, on the whole, expect that the constant change will bring better products and infrastructure to the sector.