A Brexit Opportunity for Lenders – the rise of the Contractor

A Brexit Opportunity for Lenders – the rise of the Contractor

According to an article released 5th April by the SIA, the global adviser on staffing and workforce solutions; as a consequence of businesses becoming uncertain about their immediate future, concerns relating to Brexit have pushed down the number of permanent employment positions being offered by employers in the UK.  This uncertainty leading to a decrease in their appetite to make a long-term commitment to an increase in their payroll.  Commenting on the latest IHS Markit/REC (Recruitment and Employment Confederation) report; they say that this has subsequently driven up the demand for temporary workers within both the public and private sectors.  With comparatively higher rates of pay, greater flexibility and the promise of a better work-life balance being some of the quoted benefits of working on a temporary contract basis; it is no wonder that this growth is also being boosted by the  low availability of permanent workers in their relative fields where individuals have chosen to take higher pay over greater job security.

In a recent publication CMME, the UK’s leading contractor mortgage broker said…

It’s safe to say that the current Brexit turmoil is creating a lot of political, economic, and market uncertainty. While that may be concerning, for contractors, market uncertainty can actually be beneficial – employers still don’t know what Brexit really means, and so are reluctant to hire permanent staff, instead preferring to use contractors to work on shorter term projects.

This means, in the short term at least, Brexit should be good for contractors, with the uncertainty leading companies to hire contractors rather than permanent staff.

— CMME - Contractor Mortgages Made Easy

In the period July – September 2018 there were a reported 1,549,522 individuals in temporary work of which more than 38 per cent where either Managers, Directors, Senior Officials, Professionals or associated professionals. REC UK, the not-for-profit organisation governed by a council of elected recruitment directors reports that in in 2017/2018 85% of contract workers were on placements of over 3 months and 45% where in excess of 6 months.  Whilst temporary fixed contacts don’t provide the increased (potentially only perceived) job security a permanent contract does; these longer contracts do offer improved income stability for at least the medium term.  This consumer demographic combined with the increasing longevity of contracts issued is making this type of borrower more attractive to lenders than in the past.

For this reason, we at Shawbrook have recently launched new policy specifically to support those employed on fixed term contracts with additional borrowing needs.  Helping individuals who have been in their current contract for a minimum of 3 months, with a history of contracting over the last 12 months and with more than 3 months left to run; we will use a day rate x 5 x a generous 48 weeks to calculate their income.  Whilst high net-worth borrowers are a feature of this demographic, we have no industry restrictions or minimum income rules and we can accept limited company directors as long as they own a 100% share. This criteria is available across our product range without restriction.  This means that our popular proposition features such as 95% lending, available up to and into retirement, for borrowers who may or may not have had some historic credit blips needing borrowing for a variety of purposes including business purposes or payment of a tax bill, can be helped too. 

Whatever your position, leave or remain; Brexit continues to be an uncertain feature in all our daily lives.  Perhaps we can take some comfort that for some (including brokers and lenders) at least, this uncertainty may lead to an increase in opportunity in this area at least.