P2P Industry in Europe: Uncertain yet Optimistic
The UK Government is facing a political crisis with more than 50 parliament members resigned from the government in protest of Prime Minister Boris Johnson’s leadership. Many events, such as the Chris Pincher affair, raising taxes amid inflation, the “partygate” scandal, and the lack of proper governance have created doubts about Johnson’s leadership among party members. British Finance Minister Rishi Sunak and Health Secretary Sajid Javid were the first to resign, with many other party members following suit. Finally, Boris Johnson announced his resignation, leaving the Conservative party to appoint a new prime minister.
Amid this political rejig, Nadim Zahawi was appointed as the new finance minister, taking the reins from former minister Rishi Sunak. During his 12 years in politics, Zahawi has served in some key roles such as Parliamentary Under-secretary of State for Business and Industry, Minister of COVID vaccine deployment, and the Education Secretary recently. The entire fintech sector in the UK is concerned about this development due to the monumental role played by previous finance minister, Rishi Sunak, that led the industry to new heights.
P2P Industry in the UK before Zahawi
Peer-to-peer (P2P) lending connects the people who want to lend money to the people looking to borrow money directly without the involvement of any bank. It has been present for 17 years in the UK with the first firm, Zopa opened in 2005 having 76,000 lenders today.
In the past five years (2017-2022), P2P lending has grown at a rate of greater than 20%, making it an attractive source of funds for borrowers. It is a win-win for both borrowers and lenders as they have to incur less expenses while making higher profits. However, this industry has also seen some obstacles. In 2021, Zopa had to shut down its lending arm due to the stringent regulations imposed by the Financial Conduct Authority (FCA). New rules have made it difficult for companies to conduct business, but they are targeted toward the safety of lenders from loan defaults.
What to expect from Nadim Zahawi?
Nadim Zahawi is a former entrepreneur, co-founding nationwide polling company YouGov in 2000, and one of the wealthiest members of the parliament. He is considered by many as being business-friendly based on his favourable stance on lower corporate taxes and business debt financing.
However, not all looks good on the Zahawi front. He has been suspected of being involved in tax evasion along with misusing his position to approve government backed loans for Greensill Capital, which later collapsed after being declared a scam. Zahawi even threw his name in the hat for the position of Prime Minister but was knocked out as he failed to meet the threshold of 30 votes. Sanjeev Gupta thanked minister for key role in securing loans for Greensill.
Zahawi’s impact on the fintech and P2P Industry is unclear as he has not yet made a public statement about it. After being elected, Zahawi said his focus was on “rebuilding the economy,growing the economy and bearing down on inflation”. He is expected to cut taxes to revive the economy due to a looming recession looming.
The current political climate in the United Kingdom looks uncertain right now, with various exits in the parliament and the new prime minister yet to be announced. Yet, not all seems to be lost with a growing optimism concerning the growth of Europe post the election of the new Prime Minister. The resignation of Boris Johnson appears to be a relief for many countries around Europe as they look forward to building their relationship with the UK. Inflation and rate hikes around Europe will play a key role in determining the future of the P2P industry as borrowers struggle to meet basic expenses.