Adrian Bloomfield, Chairman, Astute Capital
Without wanting to state the obvious, 2020 was an exceptionally tough year for us all, both on a business and personal level. Whilst Covid-19 has affected everyone either directly or indirectly, and lest we forget the economic uncertainty caused by the Brexit process, I think I can say, that we are all grateful that 2020 is well behind us.
However, despite all the doom and gloom, there is cause for cautious optimism as we look forward to 2021. People are becoming accustomed to a new way of working and with the approval of the vaccines, there is light at the end of the tunnel. In addition, the government managed to get a Brexit agreement over the line – all of which should lift the spirits and enable us to plan for the year ahead.
Separating the Wheat from the Chaff
From a business perspective, I think this is going to be an interesting year. 2021, especially the first half, will be a period that separates the wheat from the chaff. Over the past few years there have been several new property or asset backed loan-based businesses emerge. As the impact of the global pandemic kicks in, companies are going to have to take a more cautious approach to building their loan book and not every company is set up to this.
A key attribute that will help businesses survive and indeed prosper over the next 6 to 12 months is going to be a focus on processes. Companies are going to have to do far more due diligence on the projects that they are considering. In addition, those who take an active interest after the loan is made, to help stay on top of their investment will also prosper. Whilst this may make our work more labour intensive and somewhat slow down the pace of growth of businesses like ours, it will also add a layer of comfort and security to our investors who are trusting us with their hard-earned cash.
The UK will remain an attractive market
One of the key strengths of the UK’s economy is that the property market has always been extremely attractive to overseas investors. This has helped to finance projects and create a buoyant environment for developers and property investors alike. And I don’t see this changing. Recently, with Brexit looming and the short to medium impact of Coronavirus on the commercial property market, many have been warning of a significant drop in both national and international property investment.
I am more optimistic. The property market, despite being based on bricks and mortar is fluid and flexible, and whilst it is true that the commercial and retail markets are currently under pressure, the residential market is still growing. The UK has a significant housing shortage, and the government is continuing to incentivise developers and their investors to build more affordable housing throughout the country.
In addition, the more creative developers will have the opportunity to look at their existing commercial portfolios and be more innovative with how they use their buildings. Some may look to sell them off and others may look to redevelop. In either instance, they will be looking for investors and capital to help, and this is where businesses like ours can prosper.
Cost of lending and interest rates will remain low
Finally, whilst I never say never, it is extremely hard to see the cost of lending and Interest rates rise over the next year. This will hopefully help maintain and support those businesses and individuals who are looking to borrow or re-finance any existing debt. For those who are looking to invest their capital and make their money work for them, they will have to look beyond traditional high street and other bank saving accounts to get a strong return. In addition, although there is clearly room for growth on the stock exchanges – given that the FTSE has still not recovered to where it was at the end of 2019 – the current volatility of stocks and shares may keep prospective investors away.
Given this, I would expect to see increased interest in more stable investment vehicles such as the Bond markets both in the UK and across Europe. Investors will be able to get a decent return and given the nature of the Bond issuers business, feel like they are also putting back into the UK economy to help it prosper.
In short, I am quietly optimistic about the year ahead. It is not going to be plain sailing, but we will see opportunities for both businesses and investors, and if businesses can focus on their processes, due diligence and looking after their investors properly, 2021 could be a year to remember.
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