The UK PropTech Association surveyed members to better understand the impact the pandemic is having on the industry, businesses and wider community.
Here are the findings…
What is the greatest challenge proptechs currently face?
The uncertainty around Covid-19 has had an adverse impact on confidence and fundamentally the economy. It is expected that many businesses will see a decrease in demand and cashflow problems. This was reflected in the survey and was found to be the greatest challenge proptechs are facing.
Whilst businesses respond to this challenge by focusing on existing business, stripping down operations, and seeking funding, if the situation persists, this could have a detrimental impact on start-ups, and will lead to casualties.
The second largest challenge proptechs are facing is investors deferring, pulling out and pausing funds.
Mike Bristow, CEO of CrowdProperty, who also sits on the investment committee of proptech fund Pi Labs and is a prolific proptech angel investor suggested “one existing mechanism where the Government could ensure that early/growth stage, high potential UK businesses do not fail in this market due to cash shortage is the existing Enterprise Investment Scheme. Changing the current 30% income tax offset for investors to 100% should enable those businesses to more easily raise capital in this challenging market, ensuring a longer cash runway. It’s critical that great UK startups don’t get left behind in the packages to support the economy as many have huge potential to thrive and become world class in the long run”.
How can the Government best support proptechs?
The government has introduced several measures to support businesses and employees. While these measures are generous, UKPA wanted to make sure they were suitable and sufficient for proptech start-ups. The survey results suggested that many proptech start-ups are not eligible for the funding options, and more support is needed if more companies are to survive this. Here’s what UKPA members are asking for:
- Directors/CEOs to be able to furlough and keep working
- PAYE tax/NI payments to be delayed for all for three months as default
- Rent relief for those companies in co-working buildings
- Guidance on furloughing tier 2 visa holders
- Further funding options – Grants for those that are not eligible for the small business rates grant or where the business interruption loan is not a viable option.
Many early stage start-ups work in co-working spaces, or sublet offices which means they may not pay business rates and are therefore not eligible for the grant. Regarding the loan, the banks are only lending to those they’d have previously lent money to, often wanting security too. With cashflow being the biggest challenge for UKPA members, the lack of suitable funding options could force many of them to go bust.
While the majority of proptechs are in survival model, and some are being forced to close, it is predicted that adoption of technology will rise in the long term. As property companies are forced to find ways to be able to maintain buildings remotely, conduct viewings virtually and process property sales online, proptech is being looked at with urgency for the solution. As such, 25% of UKPA tech members are expecting growth.
For example, Prompto is seeing an increase in demand for their 360-degree virtual tours solution during this time to bring properties to agents. Tanya Samuel, UK sales director at Prompto, commented: “The corona crisis forces all of us to rethink our business models. Property viewings are no longer allowed. Neither is meeting your customers face to face.” In response, Prompto introduced a free trial and 10% discount code to UKPA members.
As the pandemic has forced companies to adapt and adopt digital transformation, the coming months will be unlike any preceding the virus. With 43% of UKPA proptech members in survival mode and 6% facing closure, in their own forecasts, the call to action is for the Government to provide easier access to emergency finance for proptechs to help them through uncertain times. Proptech plays a crucial role in supporting the property industry and helping to address national challenges.
As the representative body for the proptech community, UKPA shared the findings of the survey and recommendations with central government, and will be keeping members up to date with the response.
The UK Proptech Association is a not-for-profit membership organisation which represents the interests of the industry on policy, legislation and challenges.