Head of Quantum Funding, Paul Cunningham, takes the pulse of the asset finance industry and offers his outlook for 2019. Despite uncertainties and fierce levels of competition, he sees cause for cautious optimism.
When we look back at last year – a year mired in uncertainty for all industries across the UK – and set our sights on the year ahead, we feel confident: the asset financing industry has continued to show resilience, finishing the year up 3%, despite a lull in December.
Go deeper with GlobalData
The industry has lately been characterised by, above all, fierce levels of competition. New players have continued to enter the market, viewing the asset financing industry as an increasingly attractive investment proposition.
Naturally, the glut of liquidity in the market has had one overriding effect: appetite for credit has significantly increased among customers, whilst funders are finding it difficult to appropriately price for risk, thus margins have tightened, resulting in what some would term a ‘race to the bottom’.
The current market is a challenge for all sensible funders in our industry, and is something we see continuing to play out in 2019. The effect of the increased liquidity and flexibility of the market’s appetite for risk has undoubtedly been positive for our customers, giving them more choice, easier access to capital, equipment financing and, ultimately, a better deal.
While this has created challenges for funders, we welcome competition, and will always promise our customers the right service at the right price.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalDataThe elephant in the room is, of course, Brexit and the uncertainty it has created in the wider economy.
However, despite the uncertainty that rattles markets, the asset finance industry has remained resilient to date. In 2018, overall volumes increased and business written via broker channels was up 11% for the year, while the overall figures show 3% annual growth across the board. It is these figures that inform our outlook – one of cautious optimism.
While parliament has found itself in gridlock, we should have clarity on the UK’s relationship with the EU – a deal, a second referendum or a no deal – in the coming weeks.
Our view is that the market has coped well so far in the face of the existing headwinds, and that once Brexit is put to bed, businesses can get back to making decisions with certainty and investing in their futures.
In all this turmoil, there is reason to cheer, particularly for SMEs, which are our main client base. One area which is good news for the small and medium-sized companies in this country is the increase in the Annual Investment Allowance for the next two years, effective since 1 January 2019.
The increase from £200,000 to £1m will incentivise SMEs to invest in their business, and the asset finance market is well placed to help support these requirements.
In terms of our business, we have been able to further grow through 2018, especially in the hard asset market.
This has largely been achieved because of the value that the broker community attributes to our consistent level of service, particularly around our speed and consistency of credit decisions, something confirmed again in our latest annual survey of the broker community which we conducted at the tail-end of last year.
Even with Brexit negotiations in a state of flux, we are confident in our abilities to step up and provide market-leading service to our broker partners when they need us most. Looking ahead to the trends we see playing out in 2019, how the market recovers from what could be termed as December’s ‘hangover’ will be an important bellwether for how the industry will fare.
There are a number of economic indicators that suggest a bump in the road ahead, but I also expect an increase in funding requirements as businesses invest, following the certainty created in a post-Brexit world. From our point of view, our priority remains growing our lending in a sustainable way while offering our clients the one-stop shop their businesses need.
The Quantum business is built on a strong and sustainable foundation, with an equal mix of soft and hard assets, which allows us to continue to have an appetite for new lending in both sides of the business through the year ahead.
We continue to focus on providing fast and consistent turnaround times, and pride ourselves on the high level of service we provide to both our brokers and our customers.
