'Tis the Season
As this is our last weekly blog before Christmas, it's timely to reflect on where the UK peer-to-peer (P2P) lending sector stood in 2025 and have a peek at what comes next. In a year dominated by the rise of the great Quangocracy, unaccountable, unelected clever people chipping in their two cents, we feel it's crucial in a small way to contribute to that, and to contribute our own unsolicited musings to the grumbling discourse.
So let's recap. For our community of investors, borrowers, and supporters, the past 12 months have underscored both the resilience and evolution of alternative finance. This year's landscape has reaffirmed that peer-to-peer lending is no longer a fringe experiment; it is now a structured, maturing asset class that continues to attract both retail and institutional attention. 2025 has underscored a broader trend and affirmed what we suspected and wrote about last year: there has been an evolution of sorts beyond its original retail-to-retail model, making it a key part of the growing private credit ecosystem. Based on this year's activity, we can only foresee an increasing role for private credit and asset-backed business lending. As traditional banks tighten lending standards, SMEs and developers may increasingly rely on P2P platforms and private credit lenders, especially those offering property-secured loans, such as ours.
"The examined life is no picnic", Robert Fulghum once stated, and when you recall 2025, we would likely need more than a meagre 900 characters or less to do the challenges justice. A central theme all year has been persistently elevated inflation and its impact on households. By mid-2025, inflation (CPI) rebounded to around 3.7 – 3.8%. Meanwhile, prices for essential goods and services, food, energy, and utilities have remained high. In response, the Bank of England (BoE) maintained interest rates around 4.0% for much of the year, citing inflation risks and the need for caution. While the UK economy avoided a sharp recession, growth in 2025 has been modest at best. According to the Office for Budget Responsibility (OBR) and other forecasters, real GDP growth is expected to hover around 1.3% this year. At the same time, productivity growth remains stubbornly weak, a structural challenge the economy has been grappling with since before the pandemic. Business sentiment has suffered: higher borrowing costs, uncertain demand, and rising input costs have discouraged many firms from investing, resulting in depressed business investment as a share of GDP. The combination of subdued growth, weak productivity, and weak investment is widely seen as constraining the UK's medium-term growth potential and weighing on living standards.
As a result of embedded uncertainty, across the UK P2P market in 2025, investors have shown renewed interest in platforms offering secure, asset-backed lending, especially as traditional fixed-income yields remain under pressure. Rather than chasing volume, the emphasis is on quality, transparency, and realistic underwriting. Against that backdrop, Invest & Fund's disciplined model, consistent performance, and transparent practices position it well as a top-tier P2P option for investors seeking steady, manageable returns rather than speculative, high-risk bets. One of the perennial aspects of our asset class is that, in times of plenty, we benefit from the strength of our clients' businesses, and in times of need, we benefit from assisting them. Like all great disruptive plays, you twist in the wind and make any picture your own.
The labour market has softened in 2025 compared with the post-pandemic boom. Unemployment rose to around 5% by mid-year. Employment growth has stagnated, and many businesses, facing cost pressures and weak demand, have pulled back on hiring and investment. Meanwhile, although wage growth is positive, it has failed to keep pace with inflation for many workers. As a result, real incomes remain under pressure. This combination of rising unemployment, soft hiring, and squeezed real incomes has contributed to weak consumer sentiment, adding another drag on consumption and economic momentum.
It's not all doom and gloom, though. Despite economic headwinds (rates, inflation, cost of living), the underlying demand for housing remains substantial in many parts of the UK. With population growth, migration, and long-term undersupply, developers who move carefully are well positioned to secure viable exit strategies. For those building now (especially modest-to-mid-scale residential developments, renovations, or conversions), there remains a stable pool of potential buyers or tenants, helping justify building starts and new projects.
Given higher borrowing costs and increased caution among banks and traditional lenders, many developers have become more selective in their project choices, favouring smaller, more manageable developments or renovations over speculative or overly ambitious builds. That's meant more conservative planning: realistic cost estimates, modest scale, prioritising lower-risk projects, and managing potential cost overruns. For home-building that's good: it reduces the likelihood of over-extension, keeps projects more deliverable, and supports healthier long-term outcomes. For our sector, it means the asset class within the asset class is healthy and underpinned by the highest-quality businesses, naturally selected by those who can operate in this environment.
Sadly, the Darwinist element of survival in homebuilding means it's a harsh industry in which fewer SMEs can operate, but the positive aspect is that we are backing those who can flourish in more challenging times. The pressure to manage costs and risk has forced developers to be more rigorous this year: more realistic appraisals, conservative loan-to-value ratios, better exit-strategy planning, and improved contingency measures for delays or cost shocks. The excess years of the past have long since been purged from the sector. While that might slow speculative, high-risk building booms, it tends to produce better-quality housing developments, fewer project failures, and more stable outcomes, which, in the long run, are likely healthier for the housing stock and investor confidence.
If you have read this far or if you have enjoyed reading any of our weekly pieces in 2025, we would like to thank you. Invest&Fund will be open for business across the festive period, working diligently with our clients to ensure the best outcomes for our investors and partners.
We want to wish you all a very Happy Christmas, and we will see you in 2026.
Invest & Fund has returned over £330 million of capital and interest to lenders with zero losses, showing the rigour that governs our business.
To take maximum advantage of this robust and exciting asset class, please visit www.investandfund.com
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