After May’s shaky numbers that suggested a potential downturn in
volumes, the FLA business finance market looked rather stronger
with June’s figures.
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Though the monthly volume is down on June 2007, big ticket grew
67 per cent on May and year-to-date growth of 51 per cent continues
to look healthy. Assisted by a quarter end (albeit June tends to be
one of the smaller quarter ends), business finance, excluding big
ticket, also jumped 18 per cent on May and was slightly up on June
2007. At the half-year point YTD figures again showed a slight
increase on last year – not bad for a market supposedly in
turmoil.
Performance across the market in 2008H1 has been inconsistent.
In terms of asset categories, air, ships and rolling stock grew 161
percent YTD.
Cars, the largest single asset class, was down 1.1 per cent
while SMMT figures indicate that total registrations across the
fleet and business markets were up 1.1 per cent. Business financing
of new cars was static but equivalent used-car financing was down 8
percent, perhaps suggesting a flight to quality away from sole
traders and micro-businesses that may be inclined to buy used
vehicles.
Risk managers will no doubt have noted the most recent
statistics showing company insolvencies up 12 percent on Q1 and 15
percent on 2007 Q2.
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By GlobalDataH1 commercial vehicle finance, the next largest non-big ticket
category, was down 4.4 percent while registrations of trucks were
up 4 percent and vans slightly down at -0.3 per cent. Notably,
recent months have shown a slowing of registrations growth,
suggesting H2 may be more difficult for funders in that
sector.
With a strong June performance, plant and machinery volumes were
up 15 per cent YTD. It should be noted that July 2007 was a very
high month – some of the apparent growth may be equalised in next
month’s YTD data. Construction industry weaknesses have been well
documented and the latest CBI Industrial Trends Survey
reports output expectations for the next three months are the
weakest for seven years.
On a positive note, IT financing was up 4 percent on 2007 H1,
while business equipment was down 7 percent. In terms of route to
market, direct finance grew 10 percent YTD while broker-introduced
business was down 3 percent and sales finance was down 18
percent.
In terms of financial products, full payout leasing was static
compared to last year, though this may have been buoyed by high
value volumes.
Residual-risk leasing volumes grew 26 per cent on H1 last year,
while lease/hire purchase was down 5 percent. This pattern was
reflected in the financing of new cars with H1 residual risk
leasing volume up to £2.1 billion (almost two thirds of new-car
volumes), though the level of lease/hire purchase fell further, 22
percent down on last year.
Comment
With factory-gate inflation running around 10 percent over the
past year, a more modest growth in new-business volumes suggests
that although headline numbers look okay, cases may be down.
While commercial dynamics are likely to be complex – for
example, buyer behaviours may have changed – this may signal an
opportunity for funders to service current market demand while
achieving new efficiencies in front- and middle-office
operations.
