The Cambridge Centre for Alternative Finance has recently launched its fourth UK Alternative Finance Industry Report ‘Entrenching Innovation’, supported by CME Group Foundation. Niels Turfboer, managing director of Spotcap UK & Benelux, sat down with Tania Ziegler, the Centre’s senior research manager, to discuss the main findings of the report.
Niels Turfboer: The UK online alternative finance market grew from £3.2 billion in 2015 to £4.6 billion in 2016, an annual growth of 43 per cent. A clear upward trend. What are the other main findings of the report?
Tania Ziegler: In 2016, the market continued to consolidate, with the top five alternative finance platforms accounting for 64 per cent of total market volume. More than 35 UK online alternative finance platforms became inactive that year, which is quite a considerable number.
Another trend we saw was the growing ‘institutionalisation of funding’: Alternative finance platforms saw an average of between 25-30 per cent of funding coming from institutional investors such as banks, pension funds and asset managers.
Niels Turfboer: I suppose many results didn’t come as a surprise to you. Was there anything which stood out?
Tania Ziegler: The most interesting finding for me was to what extent UK businesses are embracing alternative finance: In 2016, approximately 72 per cent of all alternative finance market volume—£3.3 billion in total—was raised for UK start-ups and SMEs across a combination of the various debt, equity and non-investment funding options offered by the alternative finance industry. That’s a £1.1 billion—or 50 per cent—increase on the £2.2 billion of business finance raised in 2015.
This means that companies are increasingly utilising alternative finance—not as a last resort, but it is becoming increasingly mainstream as part of their funding journey. And this doesn’t just apply to business borrowing, but also to equity finance and the use of reward platforms, even at the early start-up phase.
Niels Turfboer: Many established business owners have struggled to raise capital from banks to keep their companies running smoothly and potentially growing. It’s therefore great to see how the alternative finance landscape is slowly changing business finance for the better. In the UK, the sector grew 84 per cent last year and facilitated £3.2m in investments. The industry is bigger and more sophisticated than ever.
To read the report “Entrenching Innovation” in full, please click here.
Originally published January 23 2018 , updated February 24 2020