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‘Our towns must expand to thrive’: Shropshire Council says green belt homes are a necessary evil

The prospect of building on the county’s green belt has provoked significant criticism – but Shropshire Council says it is ready to defend the plans as the best way of tackling issues faced by towns.

Plans for thousands of homes in Shropshire are vital to stop the decline of communities and ensure controlled development.

That is the message given today by the man in charge of a ‘preferred sites’ consultation for work up until 2036.

Shropshire Council planning expert Adrian Cooper says the plan for 28,750 new homes is the only way to protect communities from speculative developers, and to prevent towns falling into decline.

He said: “There is a reason – we are not just doing this because we want to upset people. We are doing it to stave off a worse outcome.”

All of Shropshire’s towns and villages feature in the plan, which varies from the modest to the large scale plans for hundreds of homes in both Shifnal and Bridgnorth.

Mr Cooper, the council’s planning policy and strategy manager, said that the impact of a lack of affordable housing was affecting communities across the county, and particularly Bridgnorth, and having a knock on effect on employers and the availability of jobs.

He said: ““If we do not make provision for business to remain and grow and expand and attract and retain employees then they will move and that’s really harmful because it exacerbates existing issues you have in towns like Bridgnorth.”

Green belt homes ‘a necessary evil’

Campaign groups in Bridgnorth and Shifnal have been outraged by Shropshire Council plans for development, with sections of green belt earmarked for future development and the prospect of more than 28,000 new homes.

Permission to build on the green belt is only allowed in exceptional circumstance – something campaigners have insisted does not exist – but a senior council official has moved to defend the plans, particularly in relation to Bridgnorth.

Under Shropshire Council’s preferred sites consultation, land across the county is allocated for where houses and businesses can built up until 2036. The plans are yet to be fully approved by the council and there will be another round of consultation.

It also needs to be approved by a government inspector.

For Bridgnorth a large section of green belt at Stanmore is being allocated for development after 2036, and areas are also included in Shifnal.

The choice has sparked a strong reaction from campaigners who have vowed to resist the proposals.

Mr Cooper said: “In both Shifnal and Bridgnorth the difficulties for some areas is it is in the green belt – somewhere people do not expect to see development and it is more difficult to justify that outcome.

“We say in both cases there is a strong argument in the case of intervention because if you do not do something there are some real risks those places will decline, lose employment opportunities, housing will decline and a whole section of the community risks being disenfranchised over decades.”

Asked about the attitude towards building on the green belt Mr Cooper said: “The way government policy works is no, you should not be looking at it.

“We need to produce good reasons and evidence to justify the outcome.”

Policy will help prevent decline

The planning manager said the council believes the policy is necessary to prevent the decline of the area.

He also said other options for providing the housing in other areas had been looked at and discounted.

He said: “Local circumstances are such that if we do not do something that is being proposed, in effect that outcome justifies the change because you can already see evidence of negative impact, of businesses relocating, local employers being restricted, wage level being relatively poor, affordable housing being limited and all of the social outcomes that come from those changes.

“You could take it and put it in another town. Shrewsbury or a different set of sites that are not in the green belt. What we are saying is we have looked at those options and this is, as far as we are concerned, the best way to tackle the issues Bridgnorth faces in the long term. And we therefore think it is justified to do that. We accept there will be differences of opinion and expect there to be.”

Mr Cooper also said there was pressure from local employers over the need to provide homes for potential workers – a claim which has been questioned by Bridgnorth campaigners.

He said: “In particular in Bridgnorth, local employers are really struggling to retain employees. There are not houses for people on the wages they pay.”

Asked if companies had come forward to raise their concern Mr Cooper said: “Yes, through things like the chamber of commerce and the LEP, these are what spurred the concerns.

“This is an issue that pertains to the local economy in Bridgnorth

“We have had a situation in recent years where we have lost businesses, they have chosen to relocate into Telford or the West Midlands because either they could not get enough space to expand and they needed the space to stay where they were.

“Part of that mix is also access to staff, and it is a bit of a vicious circle and has informed why we have chosen to intervene in the way we have with the local plan.

“Because if we do not make provision for business to remain and grow and expand and attract and retain employees then they will move and that’s really harmful because it exacerbates existing issues you have in Bridgnorth which are about limited employment opportunities for a town of its size and people travelling out of town for work.”

Mr Cooper also said that some of the development which has taken place in Shifnal is the result of not having a plan, and that they are seeking an organised approach to ensure associated infrastructure is built.

He said: “Much of the development in Shifnal now was not planned. It was not in the local development plan. It happened because you do not have five years of housing land set aside so the industry was able to argue it should be able to build on land in Shifnal that had not been allocated for that purpose.”

Source: Shropshire Star

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Cabinet minister warns of ‘adverse effect’ of no-deal Brexit

Crashing out of the European Union without a deal would have a “very adverse effect” on the UK’s economy, security and union with Northern Ireland, a Cabinet minister has warned.

David Gauke suggested he would back an extension to Article 50 if a deal between the UK and EU was not reached, and said he expected the Government to act “responsibly” if the current deadlock prevailed.

And the Justice Secretary told BBC Radio 4’s Today programme that he hoped it would be made clear in the next 10 days that the UK is in a position to leave with a deal on March 29.

But he said: “If not, then we will have to, in my view, act responsibly and make sure that this country, the economy is protected, our security is protected and the integrity of the Union is protected.

“I have very grave concerns about the consequences of leaving without a deal.”

I have very grave concerns about the consequences of leaving without a deal

David Gauke

Mr Gauke added: “I think the idea of leaving without a deal on the 29th March would be one that would have a very adverse effect, to put it mildly, on our economy, on our security and on the integrity of the Union and I think my position on that is very clear.”

He has previously suggested that Brexit might have to be delayed beyond the scheduled exit date.

Mr Gauke said he hoped a deal would have been reached by the next round of Commons votes on February 27, which has been described as a “high noon” moment for the future of Brexit.

“I would hope and expect that the Government would act responsibly and consider the situation. I hope that by the time we get to that point that there will have been a deal reached with the European Union and the House of Commons.

“If not, I think my position is very clear and I think the consequences of leaving without a deal would not be in the national interest.”

The next round of Brexit votes on February 27 has been described as a ‘high noon’ moment (Kirsty O’Connor/PA)

Business Minister Richard Harrington said he did not believe Theresa May would pursue a no-deal Brexit.

He told BBC Radio 4’s Week In Westminster: “I actually think, when it comes to it, she will know the disaster that a hard Brexit would be for the British economy and I don’t think she’ll do it.

“No Government can stand by and watch a country plummet earthwards because of a political dogma of a minority of a minority, which is what the ERG are and the people that are pressuring on that end.”

Mr Harrington also said he would back moves to give Parliament the power to take no-deal off the table at the end of the month if it seemed likely the UK would crash out of the EU, and could resign if necessary to back the amendment.

And he warned: “There are a significant number of us who feel the same and I think the Chief Whip and the Prime Minister should know that. We don’t make the noise of the ERG but that doesn’t mean quietly that we’re not there.”

Tory former chancellor George Osborne urged Mrs May to take the “threat” of a no-deal Brexit off the table.

He said keeping the option open was “totally unrealistic”, telling the programme: “I also think it’s extremely damaging to our economy at the moment because it’s forcing all sorts of companies around the world to put into action their contingency plans.”

Meanwhile, the Times reported that female MPs have been forced to move house and hire bodyguards because of tensions over Brexit.

The newspaper said one female parliamentarian was advised by police not to travel alone at night, while another was told not to drive herself and a third was warned against running in her local park.

A number of cross-party MPs have reported experiencing abuse in recent weeks.

Among them was pro-EU Conservative MP Anna Soubry, who was called a “Nazi” by pro-Brexit protesters as she was interviewed outside Parliament last month.

Meanwhile, the Government has stepped up its information campaign on Brexit preparations.

On Saturday, the Government began running a series of adverts in local and national newspapers and websites as part of a campaign to explain what leaving the EU will mean for citizens and businesses.

Source: Express and Star

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UK property asking prices rise by least since 2009 – Rightmove

Asking prices for British homes rose by the least in a decade over the past year, property website Rightmove said on Monday, adding to signs of a slowing housing market ahead of Brexit.

Rightmove said prices for newly advertised property were up by just 0.2 percent in February compared with a year earlier, the smallest increase since 2009, although they increased by 0.6 percent on the month, in line with the seasonal average.

With wages rising at an annual rate of more than 3 percent, according to official data, the affordability of houses was improving at its fastest since 2011, the company said.

“In theory the scene would be set for an active spring if it were not for the uncertain political backdrop,” Rightmove housing market analyst Miles Shipside said.

Britain is on course to leave the European Union without a transition deal on March 29 unless Prime Minister Theresa May can broker a revised agreement with the bloc that is acceptable to her divided party and parliament.

British house prices have slowed over the past year, mostly in London and nearby regions, as Brexit worries added to the headwinds from stretched affordability and higher purchase taxes for rental properties and houses costing over 1 million pounds ($1.28 million).

Official data last week showed annual house price growth slowed to 2.5 percent in December, the lowest since 2013, while surveyors see the weakest near-term outlook for prices since 2011.

Rightmove’s data is based on property advertisements on its website, which it says accounts for 90 percent of residential property on sale in the United Kingdom.

Source: Investing

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Home possessions at lowest level in 40 years

There were 4,580 homeowner possessions in 2018, the lowest number since 1980, according to data from UK Finance.

Back in 1980 there were 3,480 possessions alongside 6.2 million outstanding homeowner mortgages, but by the end of last year there were 9 million outstanding mortgages.

UK Finance stated the relatively low repossession rate had been aided by the low interest rates and more flexibility from lenders to help those in financial difficulty.

Of the latest repossessions 1,130 homeowner mortgaged properties fell into the fourth quarter of 2018, alongside 540 buy-to-let mortgaged properties.

This was down 3 per cent and 14 per cent respectively on the same quarter of the previous year.

In the fourth quarter of 2018 there were 77,610 homeowner mortgages in arrears of 2.5 per cent or more of the outstanding balance, 5 per cent fewer than in the same quarter of the previous year.

In the buy-to-let space 4,690 mortgages were in arrears of at least 2.5 per cent in December, unchanged from the previous year.

Jackie Bennett, director of mortgages at UK Finance, said: “Homeowner possessions reached their lowest level in almost 40 years in 2018, aided by a historically low interest rate environment and lenders showing continued flexibility when working with borrowers in financial difficulty.

“Mortgage arrears also remain at historically low levels, with the majority of borrowers continuing to repay their mortgages in full and on time each month.

“We would always encourage anyone with concerns about making their mortgage repayments to contact their lender to discuss the options and support available to them. Repossession is always a last resort.”

Shaun Church, director at Private Finance, said homeownership was “remarkably secure” at present despite growing uncertainty elsewhere.

He said: “Doomsayers will argue that trouble is brewing for when rates do start to rise again. But lenders have stringent tests in place that ensure borrowers can afford their loan if rates rise by a far higher percentage than is likely.

“This means that, assuming there are no dramatic changes in their circumstances, borrowers should be able to comfortably accommodate slightly higher repayments when rates to begin to creep up.”

He said the low level of arrears and possessions meant high loan-to-value (LTV) products should be made more widely available.

He said: “Affordability tests are clearly working, and with a secure system in place, there is no reason why loans of 95 per cent or above should present any danger.

“Saving for a deposit is one of the biggest financial hurdles many will face, and for some is unsurmountable.

“Better availability of high LTV mortgages would help to remove this barrier and put buyers’ homeownership prospects on a more equal footing.”

Source: FT Adviser

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Sturdy sales data pushes pound higher amid Brexit concerns

The pound edged higher on Friday as strong British retail sales lifted sentiment, though investors were considering the consequences of a Brexit vote defeat in parliament for Prime Minister Theresa May.

On a weekly basis, the British currency was set for its third consecutive drop. Analysts said the latest parliamentary loss for the government, although on a symbolic vote, indicates May does not have the support of her lawmakers.

With less than six weeks before the March 29 exit date, May has stepped up efforts to convince the European Union to grant her concessions.

“The constant Brexit can-kicking has also increased the risks of a disorderly exit,” strategists at BNP Paribas said in a daily note.

May has promised that if parliament has not approved a deal by Feb. 26, she will make a statement updating lawmakers on her progress on that day and lawmakers will have an opportunity on Feb. 27 to debate and vote on the way forward.

For a factbox on what happens next, see

The pound was set to end the week on a cheerful note as data showed British retail sales rebounded in January, shaking off some of the recent gloom over the UK economy as the Brexit departure date nears.

After bouncing following the sales release, the pound held near the day’s high of $1.2839 in afternoon European trade, up 0.2 percent at $1.2824.

It performed even better against the euro, rising half a percent to 87.84 pence per euro at one point.

The euro’s decline accounted for much of the move, though. The euro fell after a European Central Bank board member said policymakers were discussing whether to issue new multi-year cheap loans to banks.

RATE HIKE BETS FALL

Dwindling expectations that the Bank of England will raise interest rates this year have weighed on the pound in recent days. Swap markets indicate a 28 percent probability rates will rise, compared with 30 percent earlier this week.

Derivatives markets painted a slightly more cautious picture for the pound, with one-month implied volatility picking up from December lows and rising to 9 vol on Friday.

Risk reversals, a market gauge of the ratio of puts to calls on a currency, indicate investors are leaning towards buying options to protect themselves against further downside in the British currency.

Source: UK Reuters

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Housing market off to ‘subdued’ start in 2019

The Royal Institution of Chartered Surveyors (RICS) has described the housing market as ‘subdued’, noting that new buyer enquiries fell in January for the sixth successive month.

In its latest residential market survey, the trade body confirmed that demand declined to some degree across almost every region in the UK, with Scotland the only exception. Even north of the border however the trend was flat.

A drop in demand has been accompanied by a fall in new listings also, to the weakest level seen since July 2016, while agreed sales fell further as well.

What’s ahead?

The RICS survey found that sales expectations are negative for the next three months both nationally and across most parts of the UK, though surveyors are positive in expecting sales to rise over the next year.

Prices are expected to continue to slip, with London and the south east subject to the most negativity from surveyors. RICS noted that these regions have seen strong house price growth in recent years, making them less affordable.

A mixed picture for landlords

The survey revealed a mixed picture for the lettings market. While demand picked up modestly, for the third straight quarter, new landlord instructions fell for the eleventh successive quarter.

Surveyors expect rents to increase by around 2% over the next year.

Simon Rubinsohn, chief economist at RICS, noted that while some respondents had enjoyed a stronger start to the year than anticipated, the majority were continuing to find the market a tough one in which to do business.

“Resolution of the Brexit negotiations is widely seen as critical to encouraging potential buyers back into the market, although whether that will be sufficient in London and parts of the south east where affordability remains stretched and the tax changes are most penal remains to be seen,” he added.

Source: Your Money

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UK property market peakes as average prices decline

The UK property market has peaked, and average prices are falling according to a property management firm.

Apropos by DJ Alexander Ltd has analysed official data and found that average prices in all parts of the UK (with the exception of Wales which continues to increase in average price) peaked between August and November of last year with average prices in London having reached their highest even earlier in July 2017.

All average property prices across the UK, England and Scotland peaked in August 2018 at £232,194, £152,411 and £249,127 respectively whilst in Wales the December 2018 average prices continued to rise reaching £161,845.

London prices reached their peak of £488,527 in July 2017 and have been below that level ever since and, in the latest month for data are 3.0 per cent below the peak.

The value of gross mortgage advances has grown to £73.5bn which is the highest level since Q4 2007. Of further concern is that the proportion of high loan-to-income (LTI) lending (loans above four times the value of annual income for a single buyer or above three times the annual income for joint buyers) has increased 1.7 per cent to 47 per cent with the share of loans with a loan to value (LTV) exceeding 90 per cent also increasing to 4.3 per cent.

The value of outstanding mortgages balances with some arrears increased for the first time since Q2 2016 in the fourth quarter of last year although still only accounts for one per cent of all balances.

David Alexander, joint managing director of Apropos by DJ Alexander Ltd, said: “Whilst there are concerns that the property market has stalled and is now falling back in most parts of the UK this is due to a number of factors rather than the enormous overheating of the market which occurred in 2007.

“London is undoubtedly suffering from a market which grew incredibly quickly and is now stabilising at a lower level. This will be because of individuals and investor worries over Brexit and continued economic uncertainty. The latest statement from the Chancellor that growth in the UK this year is slowing to its lowest level since 2012 will have done little to reassure the property markets.

“There is little doubt that the buy-to-let market has fallen back as smaller, more independent investors exit the market due to the enormous financial and regulatory changes which have occurred in the last couple of years. This will be taking some heat out of the market at a time when individual buyers may already be holding from commitment due to external factors.”

He added: “Although the value of debt is now at its highest level since Q4 2007 and high LTI lending is once again becoming a feature of the marketplace there is little sign of the same frenetic atmosphere which accompanied the 2007 property crash.”

Mr Alexander concluded: “Despite some of the gloom currently present within the market there are opportunities, there are possibilities for individuals and investors. It requires greater skill, a long-term attitude to the property market, and some courage to understand that property prices will always ebb and flow, but the overall direction is up.

“You need to take a medium to long term view to get the best out of a home or an investment. Short termism may sometimes win but as a rule it is a tactic which is likely to fail.”

Source: Scottish Legal

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Investors grab Brexit bargains among UK housebuilders

Daring investors are dipping their toes back into UK housebuilders, attracted by high dividend yields and low valuations even though they are seen as among the most vulnerable sectors in the event of a messy Brexit.

As Britain’s exit from the EU remains shrouded in fog, housebuilders have been top targets for short sellers betting on a fall in the shares, but recent data shows short positions have fallen and some investors are buying back in.

To those investors, Brexit fears and the perceived risk to housebuilders also give the potential for strong rallies. Indeed, British housebuilder stocks have risen 11 percent since their December low and Taylor Wimpey has shot up 30 percent since then.

“I like it when there’s a short. You can have good returns when there are disagreements,” said Fabrice Theveneau, head of global equities at Lyxor Asset Management in Paris, who has recently bought shares in some UK housebuilders.

“The guys who’ve been shorting the housebuilders made a lot of money on them… they could very quickly turn their positions.”

In the last thirty days, the level of short interest has fallen for most UK housebuilders, data from FIS Astec Analytics shows.

Shares in the UK’s biggest listed housebuilders fell between 26 and 33 percent in 2018 as housing data increasingly showed a severe slowdown in sales volumes and prices, blamed in part on the uncertainty surrounding jobs and growth after Brexit.

British property surveyors are the most downbeat about the short-term outlook for house prices in nearly eight years, a survey on Thursday showed, as buyers and sellers shy away from major financial decisions.

London and the South-East have led the slide in house prices and sales. Yet a Deloitte survey found construction in four regional cities is booming.

Investors are using that regional divide to guide their choices.

“We try to avoid those mostly focused on London, like Berkeley. We prefer Taylor Wimpey, Persimmon, and Barratt Developments,” said Lyxor’s Theveneau.

TARGETED STRATEGY

Data from FIS Astec Analytics shows short sellers are even differentiating between London-focused builders Berkeley and Crest Nicholson.

Crest Nicholson has seen short interest increase significantly, with a utilisation rate (percentage of total shares borrowed) as high as 32 percent.

Last year, Crest Nicholson pulled back from London, closing its office there in a bid to reduce its dependence on the UK capital’s faltering housing market where prices were falling and costs were rising.

“We have faced some challenges in London and with sales at higher price points where political and economic uncertainty has adversely impacted customer demand… this is likely to continue pending Brexit resolution,” it said in January.

The company which focuses on the south of England has moved into the Midlands in a push into more affordable areas, and has postponed opening its new South East division.

Rival Berkeley Group, which also has significant exposure to London, has meanwhile seen short interest fall since the Brexit vote.

Charlie Campbell, an analyst at Liberum, put this down to the housebuilder’s more international customer base which could insulate it from falling confidence among UK buyers.

Berkeley Group has sales offices in Dubai, Bangkok, Singapore, Hong Kong, Beijing and Shanghai.

Another strategy followed by some investors is to home in on stocks that could show more resilience in the face of slower sales and low buyer confidence.

Paul Mumford, fund manager at Cavendish Asset Management, owns Telford Homes because of its focus on building in non-prime, “up and coming” areas of London, and its policy of forward selling developments.

Mumford also owns Henry Boot, Daejan, and St Modwen, which he says are more insulated from the cyclicality of the housing market because they are more exposed to the commercial property market.

OVER-OPTIMISTIC?

How much of the hard Brexit scenario is discounted in housebuilder shares is key to investors seeking to find value.

Redburn analysts say current valuations factor in a roughly 30 percent decline in EBIT (earnings before interest and tax) this year, which would imply a 5 percent fall in house prices and 10 percent fall in volumes. The analysts have no sell recommendations in the sector.

That is a far more benign scenario than the 35 percent fall in house prices over the next three years predicted by Bank of England governor Mark Carney if the UK exits without a deal.

There is no date yet set for a new vote on May’s Brexit deal, but share prices have been climbing despite the lack of any clarity.

“The big question is not what happens today but where are we in the middle of summer, is all this behind us?” said Liberum’s Campbell.

“If it is, then the shares are pretty cheap, but if we’ve just gone through a disorderly Brexit you could look back at the shares and at this point in time you might think we were all a bit over-optimistic.”

Source: UK Reuters

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Newport sees biggest jump in house prices

Newport, South Wales, saw the biggest jump in house prices of any UK town or city in 2018, Land Registry data revealed this morning (February 14).

Average property prices in Newport increased by 10.6 per cent to £182,505 in 2018 while Aberdeen suffered the worst fall outside London, dropping 6.5 per cent to £152,799, the latest official statistics showed.

The average growth rate across the UK was 2.6 per cent last year, according to analysis by Gatehouse Bank, with 318 (78.3 per cent) of all 406 local authorities reporting prices increased in 2018, while 88 (21.7 per cent) saw them fall.

Top 10 performing towns and cities in 2018

TOP TEN 2018
Location Dec 2018 Change YoY (%) Change YoY (£)
Newport £182,505 10.6% £17,477
Merthyr Tydfil £106,228 9.7% £9,401
Nuneaton £181,987 9.3% £15,512
Warrington £201,446 8.6% £16,031
Corby £186,631 8.3% £14,268
Stirling £187,620 8.3% £14,443
Leicester £175,250 7.6% £12,436
Liverpool £137,163 7.3% £9,286
Edinburgh £260,221 7.2% £17,378
Sheffield £168,128 7.1% £11,183

Ten worst performing towns and cities in 2018

BOTTOM TEN 2018
Location Dec 2018 Change YoY (%) Change YoY (£)
Aberdeen £152,799 -6.5% -£10,708
Eastbourne £228,774 -5.9% -£14,324
St Albans £501,817 -5.1% -£27,031
Watford £350,868 -3.1% -£11,149
Conwy £159,589 -2.7% -£4,464
Blackburn £108,379 -2.3% -£2,535
Darlington £129,985 -2.0% -£2,602
Basingstoke £301,158 -1.9% -£5,815
Barrow-in-Furness £115,481 -1.7% -£2,028
Harlow £272,324 -1.7% -£4,712

Charles Haresnape, chief executive of Gatehouse Bank, said: “It was an unpredictable year for house prices in 2018 and in the end, although the market only just outpaced inflation on the whole, there were still some stand out performances.

“Increases of 10.6 per cent in Newport and 9.7 per cent in Merthyr Tydfil are pretty striking when you consider the political instability that has weighed on the UK since the Brexit vote.

“Poor performances like that seen in Aberdeen, which fell 6.5 per cent, are proof that the cocktail of economic uncertainty, lack of housing supply and a raft of buyer incentives and cheap borrowing are creating a heady mix of outcomes across the country.

“Of course, a strong increase in one year is no guarantee of future success. Indeed, only three places in 2017’s top 10 appear in 2018’s top flight, with first place Cambridge dropping to 259th of all local authority areas last year.”

Source: FT Adviser

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‘No deal’ Brexit prompts expectation of increase in demand for business loans

As predictions have emerged of an upsurge in borrowing demand from SMEs if a ‘no deal’ Brexit occurs, owners of small businesses are being urged to fully acquaint themselves with the terms of a personal guarantee backed loan, before signing on the dotted line.

Todd Davison, director of Purbeck Personal Guarantee Insurance said, “It is widely anticipated that there will be an increase in demand for loans as SMEs look to introduce additional working capital buffers in a bid to ride out any impact on business following a “no-deal” Brexit.

“Additional funding to aid cash flow may help to offset downturns in trade or disruption within the supply chain. But the reality is that most commercial funding will need a Personal Guarantee and this commitment should not be taken lightly.

“As the UK’s only provider of Personal Guarantee Insurance to SMEs, we would urge the Directors of SMEs to fully consider their options and the risks, particularly in the current uncertain economic climate.   It’s vital Directors seek independent advice, and ensure they have investigated what alternative funding may be available.  If a Personal Guarantee backed business loan is the right solution, they should ensure they’re comfortable with all the terms of the guarantee.”

Top facts to check before signing a personal guarantee for a business loan:

  • How will the lender enforce the guarantee?
  • Can the lender serve notice or seek payment on demand?
  • What exactly constitutes a default?
  • Do the terms allow for any remedy period upon default?
  • How will your net personal assets be assessed prior to the giving of the guarantee, and is this is likely to change?
  • Does the contract state that the lender must exhaust every other avenue before making demands on you?
  • Have you considered the cost of obtaining personal guarantee insurance?

Todd Davison concludes: “Personal Guarantees are likely to be requested by every business lender. Directors of small businesses should be clear on the terms of the guarantee, and should have contractual clarity on all eventualities. They should be as genuinely objective as they can about the financial prospects of their business and its commercial value too. It’s essential to remember that a Personal Guarantee is not a hypothetical assurance, creditors can and will enforce them.

“Because they significantly increase risk for the borrower, Personal Guarantees can cause enormous stress. It’s therefore advisable to get Personal Guarantee insurance against the risk that the Guarantee is called by a lender. It will offset any outstanding obligations called in under a Personal Guarantee. The level of cover is based on a fixed percentage of the Personal Guarantee the company director wishes to insure and this is dependent on whether the corresponding finance facility is secured or unsecured.”

Source: London Loves Business