Data released by the Finance & Leasing Association (FLA) has revealed growth in UK asset finance sector, with total new business surging by an impressive 6% in September 2023 when compared to the corresponding month in 2022. 

This momentum extends over the nine-month period leading up to September 2023, which saw a 14% increase compared to the same period in the preceding year.

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Specifically, the business new car finance sector emerges as a standout performer, boasting a 49% surge in new business in September 2023. Simultaneously, the commercial vehicle finance sector reported a 12% increase in new business compared to the parallel month in 2022.

In contrast, the plant and machinery finance sector witnessed a downturn, with new business experiencing a marked 22% decline over the same period. 

These figures not only underscore the buoyancy characterising the asset finance sector but also provide a nuanced perspective on the evolving trends and preferences within the business and commercial vehicle segments. 

As businesses navigate the intricacies of economic landscapes, the FLA’s data offers invaluable insights into the shifting dynamics of asset finance, revealing sectors experiencing robust growth and others undergoing recalibrations.

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Geraldine Kilkelly, Director of Research and Chief Economist at the FLA, said: “The asset finance continued to report growth in September albeit at its slowest rate since July 2022. The vehicle finance sectors reported further robust growth, but the machinery and equipment finance sectors recorded lower levels of new business.  September saw new lending to SMEs fall by 3% compared with the same month in the previous year, the first contraction since April 2022. By contrast, new business to larger businesses increased by 24%.

“The economic outlook has weakened following a sustained period of high inflation and higher interest rates.  Nevertheless, FLA asset finance providers remain optimistic about growth opportunities as shown by the FLA’s Q3 2023 Industry Outlook Survey.  Respondents identified a range of opportunities from the development of new products, diversification into new sectors, and through supporting businesses to transition to net zero.

“The FLA has called on the Government to recognize the vital role the asset finance industry plays in supporting business investment by extending the full expensing regime to include leasing and rental in the Autumn Statement.”   

Asset-specific insights:

Plant and machinery finance:

  • Despite an overall decline of 22% in September 2023 compared to the previous year, there was a 14% improvement in the three months leading to September. However, the 12-month period showed stabilisation, indicating a potential recovery phase.

Commercial vehicle finance:

  • Commercial vehicle finance experienced a consistent positive trend, with a 12% increase in September 2023 and a commendable 13% growth over 12 months. This segment showed resilience and sustained demand.

IT equipment finance:

  • The IT equipment finance sector faced challenges with a significant 46% decline in September 2023. However, the three-month and 12-month perspectives suggest potential signs of recovery with a -20% and -19% change, respectively.

Business equipment finance:

  • Business equipment finance demonstrated a mixed performance, with a modest 2% increase over three months. However, the 12-month data showed a 3% decline.

Car finance:

  • Car finance stands out with a substantial 36% growth in September 2023, contributing significantly to the positive narrative. The three-month and 12-month periods reinforce this trend, with 44% and 41% growth, respectively.

Aircraft, ships, and rolling stock finance:

  • This segment faces challenges with a 37% decline in September 2023. However, the three-month and 12-month periods show signs of improvement with a 20% and 2% increase, respectively, suggesting potential stabilisation.

Channel-specific trends:

Direct finance:

  • Direct finance demonstrates consistent growth, with a notable 14% increase in September 2023 and a remarkable 27% growth over the 12-month period. This indicates the effectiveness of direct channels in driving business.

Broker-introduced finance:

  • Broker-introduced finance faces a temporary setback with a 10% decline in September 2023. However, the three-month and 12-month data show signs of recovery, indicating resilience and adaptability within this channel.

Sales finance:

  • Sales finance maintains positive momentum, reporting an 11% increase in September 2023. The three-month and 12-month periods show steady growth of 13% and 9%, respectively, indicating sustained demand through this channel.

Product-specific dynamics:

Finance leasing:

  • Finance leasing experienced an 11% decline in September 2023. However, the three-month and 12-month perspectives show a 7% and 6% increase, respectively, suggesting potential recovery and stability in this product category.

Operating leasing:

  • Operating leasing emerged as a star performer, with a 34% increase in September 2023 and growth of 54% over the three months. The 12-month data reinforces this positive trajectory with a 47% increase.

Lease/Hire purchase:

  • Lease/hire purchase demonstrates stability with a modest 2% increase in September 2023. The three-month and 12-month periods show a consistent 1% and 9% growth, respectively, indicating sustained demand.

Other finance:

  • Other finance faces an 8% decline in September 2023, but the three-month and 12-month periods revealed a positive trend with 22% and 9% growth, respectively. This suggests potential recovery and diversification within this product category.

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