Marked by the symbolic collapse of Lehman Brothers in September 2008, it has now been 10 years since the financial crisis. It is still to this day shocking that a financial institution, which had been operating since 1850, holding $600 billion of assets, could experience such a fundamental market failure. 2018 now marks one decade on– but what changes have occurred in UK business and finance following such fateful events? Lost trust A major consequence of the financial crisis is the loss of trust in big business. Prior to 2008, we generally accepted legacy financial institutions, and the people who ran them, could be trusted – “too big to fail” was our judgement. But as Lehman Brothers was crumbling across the pond, and our very own Northern Rock was precariously close to failure, this theory was coming into question. During this period of uncertainty, the Government had to essentially nationalise Northern Rock to save it from going under, while also putting a £85,000 limit on the savings they could guarantee for an individual per institution. Needless to say, some people stood to lose a large portion of their life savings. Additionally, bankers, who were perceived as complicit in the market failure, received substantial criticism. Those who were taking high levels of remuneration in spite of their company’s huge losses were singled out: for example, Fred Goodwin, the chief executive of RBS resigned in 2009, retiring to a pension pot of £16 million. Shortly after this, RBS reported an annual loss of £24.1 billion, the largest in UK corporate history– a coincidence not missed by the media. Record low interest rates In an attempt to stimulate spending as the UK plunged into a recession, the Bank of England lowered interest rates. In simple terms, this should encourage consumers to spend rather than save, as saving is less profitable and credit is cheaper. But as you would expect, this environment makes it difficult for investors and savers to get decent returns from high street banks and savings accounts. Prior to the recession in February 2008, the rate was set at 5.25%. By March 2009 this was down to just 0.5%, as economic conditions had continued to deteriorate. In the wake of the Brexit referendum in 2016, the rate was slashed again to 0.25%– its lowest level in history. While there have been two raises since (the current level is 0.75%), it is expected we will continue live in a low interest rate environment for another 20 years. Enhanced stress tests for banks In order to mitigate the risk of banks overstretching themselves again, banks are now required to undergo enhanced stress tests. These tests monitor their ability to lend and borrow from customers, while still coping with negative economic circumstances such as falling house prices, economic recession, or lower employment rates. Recent data from the Bank of England revealed the UK banking system should be able to effectively function in an economy where GDP declines by 4.7%, with interest rates reaching 4% and house prices dropping by one third.This means the current system is prepared for another financial crisis even more severe than we experienced in 2008. Global stock markets have performed surprisingly well The past 10 year period has included some monumental events in the global economy, such as the European Government Debt Crisis and the Japanese stock market indices losing over half their value. Fortunately, significant interventions were introduced around the world to limit their impact. These interventions included central banks setting the price of bonds, shares and property in an effort to strengthen the market. Possibly because of these efforts, while stock markets have seen some volatility, they have performed well overall. Average annual returns by June 2017 were 7% for the USA, 4.9% in the UK and 2.5% in Asia. SME-friendly access to finance In the fall-out of the financial crash, banks were lending less and less to SMEs. There are over five million such businesses in the UK, so this trend could have hampered our economic recovery. To counter this, the government introduced a number of initiatives to help smaller businesses gain access to finance in order to help them grow. This included the Seed Enterprise Investment Scheme (SEIS) in 2012, which allows innovative startups to raise up to £150,000 and investors to benefit from a 50% tax reduction. SEIS, alongside the more established Enterprise Investment Scheme (EIS), is now a major driver encouraging equity investment into early-stage companies. During the 2016/17 tax year, 2,260 companies utilised the SEIS to access£175 million of equity funding. Additionally, in 2014 the state-owned British Business Bank was created to increase the supply of credit to small businesses. Rather than lending funds directly to the end customer, the bank works with a number of different commercial partners providing mentorship and guidance to the businesses. One of the flagship schemes, Start Up Loans, has lent funds to over 58,000companies. These policies have led to a changing business landscape, with increasing numbers of people starting their own business. In fact, 2016 was a record year for business creation, with 657,790 new companies registered at Companies House. The rise of fintech Legacy financial institutions have been working hard to regain trust from the public, but, understandably, many people have moved their business over to an emerging breed of customer-centric finance companies. These technology-led businesses, often referred to as “fintech”, use innovative online services to cut out middlemen and offer better rates and transparency to their customers. For example, at Crowd2Fund, 80% of investors make a return of at least 8.5% APR, compared to the 1 to 2.5% they might expect from a traditional savings account. The range of products and services available now in the booming fintech arena is vast. Some provide lending facilities, equity raises, and FX transfer; others are directly competing with traditional banking services, or act as a marketplace, bringing buyers and sellers together. London is now the leading European city for these companies. Their reputation is that of transparency and fairness to the businesses, consumers, and investors who interact with them. With 13 unicorns (private startups with a value of more than $1 billion) out of the 34 in Europecalling the UK their home, it’s an exciting time for the British financial industry. Over the past decade we have watched trust in traditional banking and big business decline, counteracted by a rise in startups and fintech. It is this optimistic legacy of the 2008 financial crisis we will be exploring the second part of this series next week.

The price of bitcoin hit fresh lows on Tuesday, falling below $5,000 to $4,387. There is not doubt that 2017 marked a stellar year for the leading cryptocurrency, with the price of Bitcoin rallying to highs of $19,511 back in December. However, it has proved a particularly volatile week for Bitcoin, with the cryptocurrency tumbling almost 30%. Bitcoin started the year $13,500, only continuing to fall from its Christmas peak, losing 75% of its value. As a result, many are starting to proclaim that the so-called ‘Bitcoin Bubble’ has well and truly burst. Cryptocurrencies have long been controversial since their infiltration onto the mainstream finance scene, particularly given their unregulated nature. Namely, government officials and financial institutions have been weary of the decentralised nature of the currency, which has been criticised for its propensity to be exploited by the dark web, criminals or employed in fraudulent schemes. Last year, JP Morgan Boss (NYSE:JPM) Jamie Dimon famously dismissed Bitcoin as a “fraud” only fit for use by drug dealers, murderers and “people living in places such as North Korea”. More recently, the Bank of England Governor Mark Carney echoed these sentiments, voicing his concerns over the potential dangers of virtual currencies. During a speech at the Scottish Economics Conference in Edinburgh, Carney called for a crackdown on cryptocurrencies: “Authorities are rightly concerned that given their inefficiency and anonymity, one of the main reasons for their use is to shield illicit activities. This cannot be condoned. Anarchy may reign on the dark web, but in the UK it’s just a song that your parents used to listen to,” Alongside the plummeting price of Bitcoin, the price of other rival alternative currencies such as Ethereum and Litecoin has also followed suit this week, losing considerable value. Nevertheless, whilst the future of Bitcoin remains uncertain, the blockchain technology it is premised upon continues to show marked promise for the future of finance and business. In fact, major tech players such as Facebook, Google and Microsoft continue to invest in its development – and it seems Silicon Valley is onto something. The global market for blockchain is currently valued at $700 million, with that figure only set to rise. Some figures suggest that the value of the blockchain market could exceed $60 billion by 2024.