Bridging  

Threats to the bridging sector

Economic challenges

There are undoubted economic challenges ahead. The OECD’s stable forecast for the UK is based on the assumption that there is a smooth exit from the EU – and this is looking increasingly unlikely.

The OECD says failure to come to a withdrawal agreement with the EU is by far the greatest risk in the short term, suggesting that a no-deal scenario could subtract more than 2 per cent from real GDP over two years, and elsewhere, media speculation makes the OECD outlook appear decidedly positive, with the papers full of gloomy predictions.

Brexit is not the only risk ahead. There are many indications the global economy has passed its peak in the cycle and there have been signs of volatility in markets across the world.

It is also widely expected that there will be a property price crash in Australia, with recent data from CoreLogic confirming house prices have fallen the most in a single quarter since 2008.

History tells us the world can be a small place when it comes to economic contagion, and if banks suffer losses in Australia, they may become more risk averse in other regions.

In addition, we do not know the impact the UK’s growing mountain of debt will have during a downturn.

The country’s total debt is projected to reach £6.7tn by 2023, with households accounting for £2.6tn of that, a larger share than both the government and non-financial companies, according to analysis byPWC. 

Cautious optimism

There are certainly challenges, but there remains opportunity among the danger, and perhaps reason for cautious optimism about the sector.

The unemployment rate is historically low and real average earnings have risen. These are strong economic foundations and, if the Brexit situation is resolved without inflicting significant damage to the economy, there is potential for a bounce-back.

The OECD says Brexit-related uncertainties have held back economic growth since the referendum in 2016 and so any positive outcome from negotiations could lead to stronger than anticipated results.

The key for short-term lenders is to proceed with care. Companies need to invest in people to ensure the threat of skills shortage is mitigated and to have confidence in the decisions employees make.

They also need to invest in technology to help deliver this peace of mind, so that skilled people have reliable data to work with, and information-gathering needs to be improved. 

This is why it is so important that, as an industry, we are able to put aside commercial differences and come together to share expertise and best practice.