Money&Co. CEO, Nicola Horlick, offers a view of where the European and US economies are going in The Huffington Post. This, of course, ultunately affects the performance of th UK economy – and the prospects of the borrowing small and medium-sized enterprises that we bring together with people, the Money&Co. lenders.
Here’s the first part of Nicola’s blog. The second focuses more directly on the UK – and we’ll bring that to you when it’s published.
“There had been fears that the European Central Bank would lose its nerve on its programme of quantitative easing, but Mario Draghi, the Italian President of the ECB, reasserted that purchases of 60 billion euros per month of bonds would continue. He predicted that the Eurozone would grow by 1.5 per cent in 2015 and 1.9 per cent in 2016, which was more optimistic than previous forecasts. Undoubtedly, Europe has benefited from the extreme weakness of the euro. Draghi also predicted that inflation would be zero in 2015, but would rise to 1.5 per cent in 2016 and 1.8 per cent in 2017. There seems to be a general consensus that the Eurozone will avoid deflation.
“Meanwhile, the US announced disappointing employment figures for March and revised down the figures for January and February. Economists were forecasting that the monthly increase in non-farm payrolls would be 245,000 for March, but the figure came in at 126,000, the lowest monthly figure since the end of 2013. The downward revision to the January and February figures was 69,000. This put further pressure on the dollar and was another factor behind its fall against the euro. Many economists believe that the disappointing figures for the first quarter of 2015 overall are due to the extreme weather conditions experienced on the east coast and the general feeling is that the figures will rebound in the second quarter.
“In the short term, the main effect of the weak employment figures has been to push out the expected rise in interest rates in the US. It had been thought that rates might rise from zero to 0.25 per cent as early as this month, but most forecasters now believe that rates will not rise before September.
“Meanwhile, in the UK the impending election and the uncertainty surrounding the likely outcome has put pressure on the pound, which fell by 4.4 per cent against the dollar during March and has fallen by 2.8 per cent against the euro since mid-March. Figures relating to the construction sector were published last week and showed that there was growth in the housing sector and commercial construction but that civil engineering projects had suffered. It is thought that many companies and government bodies have delayed decisions ahead of knowing the final outcome of the election on 7th May.”
*** We’ve seen strong interest for the two loans currently on site.
Olsen Doors & Windows, a four-year, B-rated loan, is currently offering a gross indicative yield of 11 per cent. It has reached almost a quarter of its £250,000 funding target with 19 days left to run before the auction closes.
Globavista has an A-rated loan with a gross indicative yield of 9.4 per cent on offer at the time of writing. The auction closes in 17 days.
All the above should be read in the context of the risk warnings in this paragraph. It’s very important that we point out to lenders that lending to our companies – carefully vetted as they are – carries risk. We take a legal charge on the assets of the companies and would step in to protect our lenders in the event of a borrower’s defaulting on a loan. But before committing capital, please see the risk warnings on site, and in our Frequently Asked Questions. It’s also a good idea to take independent advice from an accountant or solicitor. See also this video, which explains more about lending, including the potential benefits of spreading capital across a range of loans to lower risk.