Important Impacts On The Financial Markets

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Within the ever-fluctuating financial markets, there are many internal and external factors that should be evaluated. From the banking sector to online lenders of short term loans, any industry that works directly with the handling or lending of money has been affected year on year. This is even more prominent in 2021, with some major global issues having an impact on any and every industry. We explore some of the major issues that the financial markets have faced, and their impact.

Brexit

The UK’s financial services market was deeply impacted by Brexit. Although fluctuations have been observed, it is still unclear of the long term and overriding impact of the deal. Negative impacts on the finance market are projected to occur due to leaving the EU’s single market. If adequate provisions are not put into place, this could lead to a disastrous outcome. 

The UK is the world’s top exporter of financial facilities. The UK had a trade surplus of £60.3 billion in 2019 where financial services contributed to almost £76 billion of this. To put this into a percentile, this equates to more than 10% in tax receipts. By leaving the EU, this could severely impact the finance sector by not having the proper provisions in place.

Covid-19

The Covid-19 pandemic is one of the major influencers of the financial markets. As well as impacting the everyday lives of individuals, it has also taken its toll on the global economy. 

Due to the Covid-19 virus, equities have faced some serious economic consequences. Covid-19 was the trigger for one of the deepest, most severe recessions in modern history. This saw global equities deliver a 15% return in 2020. Although markets were lifted by the global stimulus worldwide, this is not a long-term phenomenon. Schemes put into place by the finance sector to help the UK economy find an equilibrium include: 

Coronavirus Business Interruption Loan Scheme (CBILS)

This was announced back in March and has helped businesses with a £45m turnover.  Designed to help businesses manage their finances appropriately, it has supported SME businesses that were operating successfully prior to the pandemic. CBILS can be utilised in the support of provisions for various different types of finance facilities. This is inclusive of loans, overdrafts, asset financing and invoice finances.

Bounce Back Loan Scheme

The BBL aims to help smaller businesses, as well a sole traders. It intends to help these organisations access funding that they require by filling in a form online. This scheme allows businesses to apply for a loan anywhere within the range of £2,000 to £50,000.  As no repayments are required, the loan is available for one year, with the government promising to cover the first 12 months of this scheme. Once this timeframe comes to an end, interest must be paid at a rate of 2.5%. Benefits of this include the factor that 100% guarantee is promised to the lender by the government.

Although the financial sector may appear unstable, there are various options available to help keep businesses afloat in these uncertain times.