UK Alternative Finance Market Grows 84% in 2015 to hit £3.2bn

Rise in P2P lending and crowdfunding but the rate of overall growth of the alternative finance market has slowed down from 161% to 84%

UK Alternative Finance Market Grows 84% in 2015 to hit £3.2bn

The UK alternative finance market grew by 84% in 2015 and facilitated £3.2bn worth of investments, according to research from Nesta and the Cambridge Centre for Alternative Finance.

Peer-to-peer (P2P) business loans accounted for the equivalent of 13% of all lending to small businesses in 2015 while the equity crowdfunding market grew 295% with crowdfunding said to be “2015’s biggest success story”.

Investments via equity crowdfunding have jumped from £84m in 2014 to £332m in 2015 with crowdfunding now said to account for 15% of all UK seed and venture finance.

Despite this growth, the research claims that there are signs the alternative finance market is beginning to slow down with overall growth down from 161% in 2013 to 84%.

Concerns were also raised in the report that the risk of fraud or malpractice could derail further potential growth with 57% of alternative finance platforms voicing their concerns. These concerns included a risk of increased regulation with the data suggesting that banks backed 25% of all P2P loans last year.

In addition, the report suggested that more research into crowdfunding is required as we’re beginning to see high profile failures of businesses funded through equity crowdfunding.

Stian Westlake, executive director of policy and research at Nesta said:

“2015 has seen another year of remarkable growth for alternative finance in the UK. Little more than a collection of plucky start-ups just six years ago, the sector now does £3.2bn of business a year.”

“As the sector grows, it is sure to face challenges.[…] If the economy turns sour, backers will learn more about the quality of peer-to-peer loans. Bad news on either of these fronts will be a challenge for the industry.”

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