Highlights
Despite the positive impact of a
quarter-end, June represented another bad month for FLA
members.
Go deeper with GlobalData
Despite being nearly 10 percent up
on the previous month, compared to last year business finance
volumes (excluding big ticket) dropped by nearly 40 percent. While
this drop is fairly consistent with previous months (all have
exceeded 30 percent this year), the size of the decline has
increased to its highest level this year. Time and second-half
statistics will tell if this is significant.
After two very weak months, big
ticket picked up a little, recording £378 million (€441 million), a
44 percent rise on the previous month but still 15 percent down on
last June. Consumer and motor finance are also down, but again this
is less pronounced than in business finance.
Notably, both plant &
machinery and IT showed big month-on-month rises, 76 percent and 79
percent respectively. However, past data show this is a regular
mid-year event with volumes still respectively 38 percent and 48
percent down on the same month last year.
Direct finance dropped to 57
percent of business finance volumes, the lowest since February
2007, while at 27 percent sales finance rose to its highest level
since March 2008. Assuming plant & machinery and IT volumes
reduce in July, it will be interesting to see if sales finance
follows a similar pattern.
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By GlobalDataPerhaps the most interesting
statistic of all for the month is the performance of residual risk
leasing, once car finance has been stripped out. While the business
finance market (including big ticket) has reduced year-to-date by
over 30 percent, non-car residual risk leasing has increased 8
percent in the half-year to June to £1.7 billion. No doubt cashflow
benefits, reduced disposition risk, manufacturer support and on the
supply side and retention of incomes streams within a
risk-mitigated approach are all playing a role in this trend.
Elsewhere in the economy, new car
registrations fell 15.7 percent in June, the smallest year-on-year
decline since July 2008. However, this appears to be
consumer-driven (up 4 percent for the month), with the SMMT
reporting that the government’s scrappage scheme is now beginning
to deliver registrations to the market. Registrations in the fleet
market remained 28 percent down on previous year and the business
market (smaller fleets) down 35 percent.
Registrations for trucks and vans
remain depressed, down 40 percent in June, though the SMMT predicts
that van registrations will stabilise at the end of the third
quarter. Truck registrations could continue to reduce into the
fourth quarter, with registrations and other market activity skewed
by the Euro 5 emission deadline in October.
The Bank of England Agents Report
for July reported that investment intentions remain low, with
uncertain demand combined with constraints on both investment
capital and working capital resulting in higher hurdle rate
requirements for new investments.
More positively, a more recent
survey by the CBI (reported 10 August) indicated that businesses
are experiencing an improvement in credit availability, and expect
the situation to improve at a similar rate over the coming three
months. However, the positive headline appears to be driven by
credit for larger companies, with the financing market remaining
tight for SMEs.
Comment
Commentators have predicted growth
in non-car residual risk leasing for many years, with many finance
providers instinctively attracted by higher profitability and
improved risk mitigation, then put off by the often niche nature of
the offering and shift away from non-core financing skills. It will
be interesting to track the apparent growth in this area,
especially once liquidity comes back into the market.
The author is a partner at the
consulting and services firm Invigors, and can be contacted at
peter.hunt@invigors.com
FLA new business finance –
June
|
£m |
Month-on-month (%) |
Change on same month last year |
Year-to-date (£m) |
Year-to-date change |
Rolling 12 months |
Rolling 12 months yr-on-yr |
|
|
Business finance excluding big ticket |
1,262 |
9.5 |
-39.6 |
7,724 |
-36.7 |
18,186 |
-25.6 |
|
Big ticket |
3,78 |
43.7 |
-15.2 |
2,487 |
-21.8 |
5,454 |
-2.6 |
|
Consumer finance |
4,625 |
6.2 |
-11.4 |
26,394 |
-17.6 |
54,888 |
-15.5 |
|
Motor finance (extracted from totals |
1,446 |
16.4 |
-13.9 |
7,827 |
-23.0 |
15,838 |
-18.2 |
|
Source: FLA |
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