Industry News The Week That Was

Interest rates on the up, Seedrs for IFAs, and the evolution of equity crowdfunding

The Week That Was
Harriet Green
Written by Harriet Green

Happy Friday, everyone.

I hope you’ve had a good week. It’s a Bank of England-heavy newsletter this week – but sometimes that can’t be avoided!

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For the first time in a decade, the Bank of England has raised interest rates from 0.25 percent to 0.5 percent.

The pound dropped on the news, and this tweet of Robert Peston’s sums up sentiment pretty well: “Even though interest rate rise massively trailed, still a massive moment for our hugely indebted, low-growth, unbalanced economy.” Another common argument is that this small increase (0.5 percent is still historically low) should have been made a year ago to push down inflation as the pound rose.

Many mortgage lenders, as I wrote about a couple of weeks ago, had already factored in a rate rise and upped their rates. The 0.25 percent increase will add £10-20 on the average monthly mortgage repayment. While that is someway off the hypothetical £50-a-month increase that is said to be the point where households are significantly impacted, what matters is whether this move implies a series of rate rises. The Bank has said that any rises in the future will be “gradual and limited”.

Another school of thought is that Bank of England governor Mark Carney knows a recession is coming – while raising rates might not have been the Bank’s preferred course of action, it’ll give the monetary policy committee more room for manoeuvre if and when times get tough.

If you’ve already had your fill of rate coverage, a couple of an interesting thought experiments. One is from a debate between Peston and former Monetary Policy Committee member Andrew Sentance on Radio 4 earlier this week. The former was arguing that the central bank could tailor interest rates and the allocation of credit to local areas. The latter was saying that the Bank’s job is to set rates for the currency area – the UK.

If you were to have localised interest rates, then you would need local or regional currencies. And that raises the question of who – or what – governs those. This brings us (as is so often the case) back to cryptocurrencies, which could provide hyper-local, competing currencies outside the fiat money world. But to what extent would authorities seek to control them? If you’re interested, CryptoCompare’s Charles Hayter and I had a debate around this topic earlier in the year.

Second is a Medium article which describes economist George Selgin’s imaginary free-banking society, Ruritania. Free banking proposes that banks are treated just like other enterprises, with no special regulation, and can issue their own currency. The article is very dense, but, if you’re interested in understanding the relationship between state and money, it offers a fresh angle and explores how demand-elastic money supply (where the amount of money changes without central intervention depending on how much is needed in an economy) could be attained.


Seedrs, the equity crowdfunding platform, has started a programme to introduce financial advisers and their clients to the sector.

Intermediaries will be offered a non-advised solution for their sophisticated and high-net-worth clients who would like their own portfolio of seed enterprise investment scheme (SEIS) and enterprise investment scheme-qualifying investments (EIS) (in 2016, 95 percent of listed equity crowdfunding opportunities were eligible for some form of tax relief).

While the relationship between P2P lending and financial advisers has been growing for a couple of years now, with platforms coming into existence solely to act as portal to IFAs interested in the asset class, this is the first time a crowdfunding platform has made a deliberate move.

The idea, Seedrs says, is to “give advisers the peace of mind that their clients are investing on the same terms as professional venture capital firms”. This has been an issue for the industry in the past, with retail investors putting money into deals, only to find they had no pre-emption or other shareholder rights.

The equity crowdfunding world has been quite quiet of late. This is in part because the early adopter furore is over, and we’re waiting for the first slew of exits, and failures, which will come over the next two to three years.

What we should expect to see is increasing cooperation between platforms and VCs. The world is awash with cheap money, but venture has become very smart, with partners preferring to leverage existing deals with debt rather than put equity into riskier new opportunities. Perhaps 80 percent of startups (the number bandied about) don’t get VC money because they aren’t VC ready. Alternatively, they never will be, and we need new ways to bolster young businesses.


You likely saw the headlines: Mark Carney has warned that Brexit could cost London up to 75,000 financial services jobs. In the interest of sparking some debate, I thought I’d gainsay this. Many thanks to MP Charlie Elphicke because I’ve borrowed some of his points:

First, it’s becoming harder to take the increasingly politicised governor seriously. Before the referendum, the Bank warned that Brexit would mean higher unemployment and would hit growth. And yet unemployment is at a forty-year low and GDP is up 1.5 percent year-on-year since the vote.

Second, big banks (who famously like bureaucratic high barriers to entry because it impedes would-be competitors from entering the market) are not the sum of financial services in this country – think asset managers, market makers, PE firms, fintechs. While large firms do account for 72 percent of FS employees (who employ over 1.1m across the country), they make up only 0.4 percent of firms. The FS ecosystem we have here includes the partners and businesses banks lend to and serve. If some of the largest were to move operations abroad, would it not open up opportunities for smaller players?

Third, it contradicts what banks and businesses have actually said. Earlier this week, UBS said moving 1,000 jobs out of London post-Brexit is “more and more” unlikely. And a Reuters poll of over 100 finance firms suggests the number of job losses would be below 10,000 in the “few years” following Brexit.

Fourth, London has retained its position as the world’s leading financial centre, with New York, its closest rival, slipping further down the Z/Yen global financial centres index. Apparently, Brexit isn’t as much of a worry as Donald Trump’s views on free trade.

Relatedly, data this week from London & Partners showed that UK tech firms received more VC investment from Silicon Valley than France, Germany and Ireland combined. Markets are the sum of sentiment; we should be talking up our country.


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About the author

Harriet Green

Harriet Green

Harriet Green is a former financial and business journalist. She left City AM earlier this year to set up a company that creates new forms of ownership in public services. She covered fintech, alternative finance and entrepreneurship for four years, but now you’ll more likely find her in a public convenience north of Birmingham. Harriet also works as a consultant for venture-stage tech firms.