The post-Brexit scene seems very confusing, what with different statistics and reports coming out on the economy and different views being expressed on whether or not the peddlers of fear were correct. What is certain is that many of the mainstream bankers have taken fright with the old saying, “banks are institutions that lend you an umbrella, but are quick to take it away when it starts raining”, proving true once again.

Anecdotal evidence seems to suggest that this drying up of bank funding is affecting the bridging market, with some smaller firms being offered cases by brokers who previously ignored them. On the surface, the demand is there and even increasing, but pockets are not deep enough to satisfy it.

The result of the referendum was a major shock. Even those who voted to leave out of sincere conviction, rather than anger at a status quo that seemed to be leaving them behind, didn’t expect to win. In fact, for many firms, there was no Plan B. The result of this was to provoke a knee-jerk reaction and run for cover.

In time, the realisation will set in that, although there are definite signs of a slowdown and some price erosion in the residential market, there is no indication yet that a full-scale crisis is at hand, although this has not stopped some people from predicting one.

The slump in the exchange value of sterling has made UK assets cheaper for foreign buyers, but weaknesses in the global economy are still a problem. Nevertheless, in time I expect that the high-end market will improve from current lows. UK exporters who are fulfilling orders sold in other currencies may benefit if they didn’t take out forward contracts, but it will take time before lower prices will affect future sales. On the other hand, many imports will become more expensive, thus fuelling inflation.

Politically, the new chancellor has the opportunity to review and change previous government policy. He has stated that we now need to set policy “in the light of the new circumstances that the economy is facing”. However, none of this alters the fact that we have been living beyond our means and that the public debt continues to rise.

With returns on cash investments at historic lows and the threat that banks may charge businesses for the privilege of holding credit balances, investment in property is still attractive. This, coupled with the under provision of new homes, should ensure that price falls are manageable. However, although the residential market should stabilise, what will happen to the commercial market is anyone’s guess, but confidence is low at the moment.

So, is this 2007 all over again? In my opinion it isn’t, but continuing pessimism could be a self-fulfilling prophecy. I do however have concerns about the P2P scene, as the almost inevitable failure of a P2P firm, whatever the basis of its lending proposition; will have a widespread effect on P2P investment, regardless of the quality of the offering.

Politically, one of the areas that need to be addressed is the issue of stagnating and falling wage levels. According to the Financial Times, “there is a correlation…between places that voted for Brexit and places where average pay is low. For example, 76% of voters in Boston, eastern England, voted to leave the EU (the area with the lowest pay in the country) compared with 31% of voters in Richmond upon Thames…the area with the highest pay”.

Taking Theresa May’s statement on becoming Prime Minister at face value, these issues will have to be met and it will be interesting to see how this will affect confidence in the economy as a whole. Housing costs are clearly a major factor and we can already see how there has been an attempt to dampen the buy-to-let market to make housing more affordable.

So, what is going on? Nobody really knows, but what is required is to be positive without being over-confident and to hold one’s nerve.

GoingOn

A version of this article appeared in the August 2016 edition of Bridging Introducer