Peter Hunt analyses market
statistics for the year to 31 March.
Go deeper with GlobalData
Highlights
Once again, FLA statistics appear to offer
glimmers of hope that the market is turning around.
March’s business finance volume (excluding big
ticket) was up nearly 11% on the previous year, the first annual
increase since September 2008. With the benefit of quarter- and
year-end activity, the highest total for 17 months was
recorded.
By contrast, big ticket volumes continue to
struggle badly. Usually the highest volume month of the year, at
£89m (€104.2m) March’s total was 87% down on last year. Comparison
with the previous March totals tells the story – from 2006 to 2009
March volumes were (respectively) £992m, £622m, £819m and
£698m.
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By GlobalDataConsumer finance also showed some annual
growth which – like business finance – was driven by an increase in
car volumes (the reported motor finance figures being a subset of
the combined business and consumer volumes). In fact, without motor
finance growth, the consumer finance total would have presented a
year-on-year volume reduction rather than a slight growth, and
business finance’s annual growth would have been under 2% rather
than nearly 11%.
As a result, the car finance proportion of the
business finance total (excluding big ticket) rose from 30% in the
first quarter of 2009 to 36% in the first quarter of 2010. With the
scrappage scheme coming to a close, the SMMT expects a drop in
overall registrations in the coming months. But with fleet
registrations (less impacted by the scrappage scheme) up 21% for
the month, there appear to be some signs of continuing cautious
optimism for business financiers.
Other asset categories continue to fair less
well, with March volumes for commercial vehicles, plant and
machinery and IT equipment all down on last year. Along with
business equipment, first-quarter totals for these assets were all
down 10% to 20% on last year, at least showing a softening of
decline compared to previous quarters.
In terms of finance products, full payout
leasing and lease/hire purchase showed some positive growth.
Despite an improving trend in cars and commercial vehicles, the
shift away from residual risk leasing continues, perhaps as lessors
remain nervous about future asset values.
Direct finance in March broke £1bn for the
first time since July 2009 and recorded the highest total for 17
months. Broker finance went one better, recording the highest total
for 18 months. Hopefully this is a sign of increasing demand and
liquidity supply. The first-quarter number of compulsory
liquidations and creditors’ voluntary liquidations in England and
Wales came down 18% on last year and 8% on the previous quarter,
suggesting an improving lending environment.
Comment
While they show positive signs of recovery,
there are factors that should be considered when reviewing the
month’s trading figures.
Notably, there were two more working days in
March 2010 than in March 2009, equating to an extra 10% of trading
time.
Especially for flow businesses, this
represents a significant difference – it may be no coincidence that
the predominantly small-ticket asset categories of cars and
business equipment had a good month. Additional factors such as the
car scrappage scheme have already been mentioned.
As a result, it would not be surprising if
volumes over the next few months appear relatively subdued, albeit
with an underlying shift towards recovery.
The author is a partner at the consulting
and services firm Invigors, and can be reached at peter.hunt@invigors.com
|
£m |
Month-on-month (%) |
Change on same month last year |
Year-to-date (£m) |
Year-to-date change (%) |
Rolling 12 months (£m) |
Rolling 12 months yr-on-yr change |
|
|
Business finance excluding big |
1,705 |
65.1 |
10.9 |
3,720 |
-4.5 |
15,515 |
-24.4 |
|
Big ticket |
89 |
-20.5 |
-87.2 |
400 |
-74.7 |
2,400 |
-60.5 |
|
Consumer finance |
5,229 |
41.9 |
1.9 |
12,469 |
-4.3 |
52,579 |
-8.7 |
|
Motor finance (extracted from totals |
2,399 |
63.1 |
30.8 |
4,904 |
32.6 |
17,559 |
4.1 |
|
Source: FLA |
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