What next for the UK financial markets?

It’s been a turbulent 12 months for the UK, particularly on the political side where the aftershocks that were felt from the Brexit result were eventually magnified by returns in the June election of 2017. In what was intended to be a tactical gamble and a mandate for those Brexit negotiations, the ruling Tory party somehow managed to turn an overall majority into minority rule with a controversial agreement with the DUP helping Theresa May to cling on to power.

All of these aspects have led to a slump in the pound, compared to other currencies across the globe and forex traders in particular are now asking ‘what’s next?’

Spending

The fallout from the UK General Election continues to attract headlines with the prospect of another national ballot in 2017 yet to be ruled out. In the meantime, the issues surrounding Brexit seem as if they are never going to go away and both of these factors continue to have a bearing on the rate of the pound against the Dollar and Euro in particular. In recent weeks however, financial news in Great Britain has tended to focus on what could become a worrying and rather more long term trend. Consumer debt is creeping back onto the agenda and the headlines are seeing more and more attention heaped on to the issue of overspending.

Holding Back

The Guardian were one of a number of UK newspapers who reported in June 2017 that banks across the country were holding back funds as spending and borrowing got out of hand. All of the usual suspects were named with credit cards and payday loans at the centre of that borrowing but interestingly, cheap can loans are also being blamed for an upturn in public borrowing. It would seem that sub-prime lending remains more widespread than the casual observer may have thought. While the mortgage market may have tightened in this respect, it is still very possible to borrow larger sums for items such as cars even with poor credit or a lack of any real credit history. The end result is a predictable one: Defaults on payments have led to some lenders tightening their terms even further while it would appear that some may even disappear from this sector of the market. We’re back to the Guardian once again who report on the Car Finance Company: An organisation who claim to have helped their customers raise enough finance to buy over 80,000 new cars. That should be a positive figure for the car industry and for the economy as a whole but as the report took a closer look at the company’s own situation, it made for less comfortable reading. The figures showed that one in five customers on the company’s books were falling into arrears and that the US parent company had already written off its £50m investment. The lender seems to specialise in subprime cases with CCJ’s and IVAs among the many situations which would lead to flat rejections elsewhere. It’s unfortunate that those who have lost their job and are rebuilding their lives, will not default again and they are among the individuals who will lose out. On a wider scale, the news is not good and could not only spell more uncertainty for the pound, but lead to real questions over a UK financial collapse.