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Alternative credit continues to grow but UK deal growth hit by Brexit, report finds

By Daniel Lanyon on 21st December 2016

The progress comes as a result of increasing acceptance of alternative credit in areas traditionally dominated by banks but also heightended political uncertainty.



Alternative lenders are continuing to increase their deal flow across Europe with a 7 per cent year on year growth in the third quarter of 2016 compared to the same period last year, according to a new report by Deloitte.


The 13th iteration of the Deloitte Alternative Lender Deal Tracker, which covers Q3 of 2016, found that of the 50 lenders included in the research thee market has seen decent growth.


Brexit, however, was a potential hindrance to further growth with the UK – still the biggest player in the alternative credit space but seeing a fall deals compared to a strong uptick in Europe.


Whilst on the whole, alternative Lenders in Europe increased their deal flow in Q3, the UK deal flow decreased, by 21 per cent compared to the previous 12 months, with the rest of Europe more than offsetting UK’s reduction, increasing by 29 per cent vs the prior year.


Floris Hovingh, head of alternative capital solutions at Deloitte, and an author of the report says the short term political events in Q3 of this year, the Brexit fallout and the run up to the US election, have did fuel uncertainty in markets. One the whole, however, he says markets have quickly shrugged this off.


In terms of fundraising, 2016 is down compared with 2015. Although, Q2 recovered strongly, the market returned to relatively subdued issuance in Q3. Whilst early indications suggest that the year will finish more strongly, fundraising for 2016 as a whole will still likely be down by at least 40 per cent due to market volatility in 2016 and a bumper fundraising environment in 2015.


Direct lending is one likely area of growth, Hovingh says, with around 130 direct lending managers seeking to raise $50bn, and current low relative allocations from institutional investors. Albeit one that is rising. 


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