A €329m fall in lending in 2012 has taken leasing in the Czech Republic to its lowest level since 1996, according to a report by finance technology provider White Clarke Group (WCG).

Total new business financed by Czech Leasing and Finance Association (CLFA) member companies for 2012 amounted to a total of CZK37.9bn, of which CZK36.3bn was for commercial leasing and CZK1.6bn was for consumer leasing, representing a CZK8.5bn drop on the 2011 figure.

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Vehicle leasing dominated the market in 2012, with passenger cars making up 32.5% of the market, followed by trucks at 29.8%. Machinery and industrial equipment was third, at 23.3%.

There were 197,800 active lease contracts in movable assets on the books of CLFA members. At the end of 2012, fleet management provided by CLFA members comprised of 5,971 vehicles.

The drop in leasing business comes despite 28% of SME’s in the Czech Republic having said they prefer to use specialist lenders or leasing providers to finance capital investment, according to a GE Capital survey mentioned in the WCG report.

Investment was predominantly for upgrading existing equipment for 55% of survey respondents, while 52% were looking to invest as a result as a result of deteriorating equipment. Lack of affordable finance was cited as a barrier for investment for 29%.

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Peter Kainradl, WCG managing director for Germany and Austria, said bank lending has reduced in the Czech market since 2008 which might normally benefit lessors as alternative lenders to the SME market. However, continued economic problems in the eurozone and the impact of changes to the taxation of leases, instigated before the recession, have impacted business volumes.

Kainradl added if the recently elected Czech government instituted "pro-growth measures that have so far only been talked about" such as changes regarding tax depreciation on investment it could have a positive impact for lessors.

He said: "At present, the Czech leasing market remains subdued, with low levels of demand, particularly for machinery and equipment, although there are signs at the beginning of the second half-year that new business volumes are picking up again.

Confidence is gradually growing among Czech SMEs, which tend to show a greater preference for using non-bank financing such as leasing than their counterparts in other CEE countries.

"It is this sector that has the greatest opportunity for growth and will underpin the country’s economic revival, and that of the asset finance market."