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In the press - 'Uncertainty creates opportunity'

Updated: Feb 15

First Published 02/23

Brian West writes for 'The Intermediary' about how uncertainty creates opportunity

After the perfect storm that was 2022, is this the ideal time for specialist lenders and brokers to shine?

Whilst the impact of Kwarsi Karteng’s paradoxically named “Growth Budget” in September has largely abated, we are still facing many challenges as we enter 2023. Inflation remains close to a 40-year high despite interest rates having been increased ten times since December 2021.

Added to this UK workers have seen the biggest drop in their real earnings since records began, houses prices are falling and predicted to keep doing so until 2024 and levels of industrial action in the public sector are now reminiscent of the famous ‘1979 Winter of Discontent.’ The outlook is far from rosy as we stand poised on the brink of recession and with war still raging in Ukraine macro-economic prospects look tough.

In truth, you probably don’t need to read this here with the bad news rammed home relentlessly in the press and on TV. Indeed, some sections of the media, instead of simply reporting on the economy, seem keen to drive it in a certain direction. Perpetually focussing on gloomy economic forecasts and dire predictions, the only good news that’s ever reported is the token snippet at the end of the bulletin celebrating Winnie’s 110th birthday or the rescue of a pony stuck in a bog. Is it any wonder that so many people have stopped watching the 10pm news?

No economic downturn is all bad news.

It's time for some balance. Despite the likelihood of above target inflation persisting, the Bank of England (BOE) is probably nearing the end of its tightening cycle. There is a growing consensus that labour market indicators, demand and gradually declining inflation will see a pause and very possibly an end to the run of base rate increases very soon. Thereafter the markets appear to think rates could even start to decline.

At the pumps we’ve seen fuel prices falling fast in recent months. Less visible, but equally positive, wholesale gas prices, trading at more than £5.00 per therm last August, had dropped to £1.58 per therm by the middle of January – lower than before Russia invaded Ukraine. In time this will feed through into falling consumer bills. Of course, many sections of the media continue to highlight the ‘disastrous’ impact of us leaving the EU, whilst simultaneously ignoring that our exports to EU countries reached a record £17.4Bn in July 2022. Maybe that additional red tape is not so onerous after all…

Add to this the potential for 300,000 UK workers to re-join the labour market in 2023 reducing staff shortages in highly skilled sectors, as well as targeted schemes for Ukrainians, Afghans and Hong Kong residents which will help immigrants contribute £19-30Bn to real GDP in 2023 and the picture is suddenly not looking quite so gloomy. There is much more but of course but the BBC are unlikely to mention it. Why report that Birmingham based National Express have just won an £878M contract to run two regional train lines in Germany – that’s far too positive!

Real opportunity for specialist lenders and brokers…

Our positivity as an industry is hardly surprising given that the specialist lending industry effectively grew out of the credit crunch and subsequent recession in 2008-9. Consequently, we are extremely well placed to offer support in a challenging trading environment. There are many lenders with highly experienced teams and strong, diverse funding lines, ready to meet the funding needs of borrowers.

Whether it’s opportunistic investors in what is increasingly a buyers-market, entrepreneurial SMEs seeking to take advantage of time sensitive opportunities, or developers doing their bit to address the perennial structural shortage of new homes, lenders such as Saxon Trust stand ready to assist.

Crucially housing starts are now picking up. Whilst concerns about the planning system, a lingering post-pandemic supply squeeze and increased borrowing, material and labour costs can’t be ignored, developers remain very positive given the government’s continued commitment to hit its target of 300,000 new homes annually.

Underpinning this confidence is a growing focus by both developers and lenders on the UK’s exacting net-zero carbon target for 2050. With investors increasingly refusing to put their money into projects that are harmful to the environment, developers are focussing more and more on ESG (environmental, social and governance) principles, not least of all because it helps them to raise finance.

With top-down pressure from government, investors, lenders, and insurers, as well as demand from below, with potential buyers and renters (particularly among younger demographics) insisting on sustainable, eco-friendly homes and the lower energy bills that come with them, it’s not hard to see the huge opportunities that still exist, even in the face of short-term market uncertainty and upheaval.

Innovative specialist lenders like Saxon Trust, born out of adversity in the last recession, are now bigger and better funded. As an industry we are well placed to emerge from the current downturn stronger than ever. If so, we will continue to win market share from more traditional, high-street lenders. Opportunity, as they say, knocks!



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