Rules are designed for
outright purchase, not leasing, explains Julian Rose, head of
asset finance, Finance & Leasing
Association.
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When the FLA held
its first low-carbon leasing seminar, in February 2010, one of the
concerns was that the Carbon Trust’s interest-free loan scheme to
help small and medium-sized enterprises invest in energy saving
projects was an obstacle to the development of the leasing market
for low-carbon equipment. Whatever the attractions of leasing, it
is always going to be difficult to beat an interest-free loan.
How things have changed in a year.
Following the FLA’s lobbying of the Trust, it decided not only to
find a private-sector partner for running its SME energy-efficiency
financing scheme, but to invite interest from providers of asset
finance as well as banks providing conventional loans. The outcome
of this is that Siemens Financial Services will be the Trust’s
partner.
The important role of leasing was
confirmed in a recent report from Barclays and Accenture, called
Carbon Capital: Funding the low carbon economy. The report
concluded that of the €2.3trn required for purchasing low-carbon
technology in Europe by 2020, €482bn would be funded by
leasing.
Staggering numbers indeed, pointing
towards over a quarter of the asset finance market being for this
type of equipment.
This is all encouraging news, of
course, but there are plenty of hurdles on the way to it becoming
reality.
One is that existing tax incentives
to businesses considering using low-carbon technology are only
designed for purchasing equipment. They don’t work for leases. The
FLA’s message to the Chancellor ahead of this year’s Budget is the
time has come to remove that particular bit of red tape.
Other issues in the market will
need to be overcome. Many believe, for example, that a more
effective secondary market for asset finance deals is needed to
help expedite the development of low-carbon equipment leasing.
Accounting may also be an issue
with the uncertainty over how leased equipment may appear on
balance sheets.
The potential for asset financing a low-carbon economy, the
barriers to the growth of the market, and how those barriers might
be overcome are likely to become hot topics for discussion.
