The release of January’s FLA statistics presents mixed results.
Overall, business finance figures are down on December (not
surprisingly as December is always a big month) but remain well
ahead (11 per cent) of the same period in 2007. Based on January
figures, big ticket financing has also enjoyed a positive start to
2008.
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However, January’s business finance figures are buoyed by a 29
per cent rise in car financing. Commercial equipment financing –
the driver of 2007’s impressive growth – rose only 1.3 per cent
year-on-year, the lowest level for 14 months. While the business
car financing increase may prove be a reporting quirk, against the
current backdrop of lower capital investment forecasts and market
liquidity concerns, decelerating commercial equipment finance
volumes may represent the start of an untimely market
adjustment.
Data from the wider business community appears to indicate
cautious growth. Van (2.7 per cent) and truck (51 per cent)
registrations are both up on 2007, with trucks returning to a
longer term norm after the introduction of digital tachographs and
Euro 4 emission standards. Overall car registrations were down 2
per cent, but fleet registrations remained stable, increasing their
share of total registrations to 56%. HM Treasury and consensus
growth forecasts show GDP and fixed investment in the 1.75-2.25 per
cent range for 2008. The CBI report strong order books for the
manufacturing sector, as a weakened Sterling against the Euro
underpins strong export order books, despite some weakening of UK
demand.
Within the FLA statistics, residual risk financing continues to
show above market growth (at over 20 per cent p.a.) and now
represents almost as much volume as full payout leases.
For the last four months in succession, direct finance has
represented approximately 75 per cent of the total market volumes.
It seems unlikely that this spells a decline in sales finance. The
breakdown of FLA statistics by finance product and the
direct/indirect split both include big ticket data – so to some
extent direct finance growth will be driven by a growth in big
ticket transactions (all of which are likely to be direct).
Moreover, treatment by lessors of broker-introduced business
(potentially as “direct” finance) also skews the data.
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By GlobalDataComment
Times will inevitably be harder for finance providers than in
2007. However, as highlighted by the manufacturing sector, there
will remain areas of above-market growth opportunity for those
smart enough and agile enough to take advantage of these changing,
more volatile times.
The author is a partner in the consulting and services firm
Invigors LLP, peter.hunt@invigors.com
