Brexit will pose another test for the peer-to-peer lending sector and platforms need to prepare for it as best they can, industry stakeholders have claimed.
There are five months left of the transition period where the UK has been negotiating with the European Union for a trade deal.
The government has said it will not extend this negotiation period, and with a deal yet to be struck, the UK is currently on course for a no-deal Brexit.
Read more: Brexit negotiations: UK vs EU, round three
Mike Bristow, chief executive of CrowdProperty, said that a no-deal Brexit would lead to economic challenges that affect P2P as almost every asset class is impacted by the macro-economic environment.
He said that similarly to Covid-19, Brexit presents a test for the sector and platforms need sufficient scale and resources to perform, as well as knowledge of cost acquisition for borrowers and lenders.
“It’s another test that will filter out the poor performers,” Bristow said.
“And this drives a flight for quality. Borrowers want to work with, and lenders invest in, the reliable best platforms with a proven track record.”
He said CrowdProperty has been planning for Brexit for years and is a good place, having performed well during Covid-19, reaching several milestones such as funding 1,000 homes worth almost £170m.
“There is enduring demand throughout any macro-economic scenario,” Bristow said.
“We’ve been providing funding to great developers in undersupplied markets at mainstream price points during Covid-19,” he said.
“We work with our borrowers to ensure supply chains are strong and robust, whether there is a second wave of Covid-19 or disruptions due to Brexit negotiations.”
Daniel Rajkumar, founder and managing director of Rebuildingsociety, which launched an app for investors earlier this month, said that Brexit will provide another challenge for platforms to deal with.
He said the better platforms will have an eye on the European crowdfunding directive, which is a harmonisation of legislation that includes P2P lending, and look to take part in the pan-European approach to crowdfunding.
“Developing relationships in Europe could be a way to mitigate the effects of Brexit,” Rajkumar added.
Meanwhile, Filip Karadaghi, managing director of LandlordInvest, said that the property market has been moving again after lockdown restrictions were eased, which has benefited the buy-to-let P2P lending platform.
But sooner or later Brexit uncertainty will hit and when it does, security is of upmost importance, he added.
“You can’t prepare for uncertainty,” Karadaghi said.
“You can only adapt to the reality as it happens. We have the potential for two crises, Brexit and Covid-19. Platforms need to ensure borrowers are well, do not default and repay on time.”