Is Funding Circle the barometer for SME opinions on Brexit?

Listed SME fintech Funding Circle sent waves through their share price this week, with news the lender was halving its growth forecast for 2019.

Facing reduced credit demand from the sector, it now anticipates its 2019 revenue growth on 2018 will be 20%, rather than a previously forecast 40%.

Loans under management on the platform are up 37% for the first half of 2019 compared to the same period in 2018, currently sitting at £3.5 billion. Originations are up 14% on the prior corresponding period, at £1.2 billion. All healthy figures in their own right.

While the share price took a fall on the news growth was expected to slow, investors on the P2P lending platform are no doubt pleased with the forecasted increase in returns on a net basis. The full year 2019 outlook expects these to be in the range of 5.0 – 8.5%, up from 4.4 – 8.4% in 2018.

The company is blaming the ‘uncertain economic outlook’ as being behind the drop off in growth. With Brexit negotiations and outcomes still incredibly uncertain, it’s easy to empathise with the many UK based SMEs who must be struggling to read between the tea leaves of UK and EU policy, in order to decide whether to make capital investments in the next 12 months.

So just what do SMEs really think about Brexit?

Research released by payments provider WorldFirst in February of this year seemed to think they were smelling the Brexit roses, with the number of small businesses indicating they were broadly positive about the UK’s exit hitting 41% in the last quarter of 2017, up from 33% in the prior year.

A separate study by academics at St Andrew’s University found that in 2016, 25% of businesses viewed Brexit as a major obstacle to their success. This number had jumped from 16% in the year prior, when they were surveyed right after the referendum. Their survey canvassed 15,867 SMEs, using government data collated by the UK Department for Business, Energy and Industrial Strategy.

Research released by Co-operative Bank in January placed Brexit concerns as top of the list of worries for SMEs, followed by increase in operating costs and then competition. Access to funding was second to last on the list, which may be testament to companies like Funding Circle doing their job well.

SMEs, like most of us who are surveyed, probably say one thing and do another. My bet is that the pace at which businesses like Funding Circle are growing is probably one of the best barometers of the SME market’s true reaction to Brexit. And in line with a cliché that speaks to the human condition, they seem to be living out the phrase, ‘when in doubt, do nothing’.

Daily Fintech Advisers provides strategic consulting to organizations with business and investment interests in Fintech. Jessica Ellerm is a thought leader specializing in Small Business and the Gig Economy and is the CEO and Co-Founder of Zuper, a new superannuation startup in Australia.

I have no commercial relationship with the companies or people mentioned. I am not receiving compensation for this post.

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