So far, the slowdown suggested by anecdotal comments from
funders and brokers is not clearly showing in the monthly new
business statistics released by the Finance & Leasing
Association. Business finance volumes (excluding big ticket) for
March 2008 are well down on the same month last year (9.1 per cent)
but still higher than any of the intervening months. Year to date
(YTD) totals remain above the same point last year. Big ticket
continues to do well, showing annual growth of over 30 per cent
with the March figure being the highest monthly total for two
years.
Lower business finance volume than March 2007 was largely driven
by car financing (down 20 per cent) with other assets down 4 per
cent. On a YTD basis, business car financing remains up at 1.7 per
cent. For new cars this figure is 2 per cent, a good performance
compared to a YTD increase in fleet market registrations of 0.8 per
cent and static business car registrations.
RV setters will no doubt have noted increased registrations of
diesel cars (42 per cent of YTD registrations compared to 38 per
cent last year) and 15 per cent growth in alternative fuel
vehicles, presumably driven in part by recent increases in oil
prices.
Thanks to new data made available by the FLA on a monthly basis,
it is possible to look closer to understand which asset categories
are performing well. Notably, YTD commercial vehicle new business
is down 11 per cent, while registrations are up 7 per cent (vans
2.5 per cent, trucks 44 per cent). This apparent digression could
be a worrying development for mainstream business finance
providers, and with the SMMT reporting strong order books for the
rest of the year, this is something that may need to be
addressed.
More promising is the continued strong YTD performance of plant
& machinery (up 8 per cent), IT equipment (5 per cent) and
business equipment (7 per cent). It seems likely that factory gate
inflation and extended order books will maintain a positive
momentum to plant & machinery figures for some months,
regardless of current equipment ordering behaviours.
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By GlobalDataNot surprisingly in light of strong big ticket business volumes,
the two asset groups “aircraft, ships and rolling stock” and
“international assets” have both performed robustly YTD. Property
is also up 12 per cent, although it remains a very small part of
the business finance market.
Market breakdown by finance type continues to show the demise of
finance leasing, for the first month in five managing to break 20
per cent of the total market. Interestingly of late, lease/hire
purchase has been well below historic 40 per cent plus levels, with
“other finance” taking around one quarter of all new business
volume. While this may be a wide range of facilities, its growth
suggests further investigation is valid.
Elsewhere, latest HM Treasury forecasts show no change, with GDP
and fixed investment both expected to grow 1.75- 2.25 per cent this
year. Underwriters will note a slight increase in Q1 company
liquidations, in England and Wales up 2 per cent on the previous
quarter and 4 per cent on 2007Q1. Corresponding individual
insolvencies were up 1.7 per cent on 2007 Q4 but down 13.2 per cent
on 2007 Q1.
Comment
Recent months have presented the industry with a number of high
profile casualties. However, fixed investment levels remain solid.
Those companies able to take advantage of current liquidity
weaknesses could do well.
The author is a partner in the consulting and services firm
Invigors LLP, peter.hunt@invigors.com
