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April 29, 2020updated 26 Apr 2020 2:28pm

UK office equipment leasing to grow in Covid-19 aftermath

By Alejandro Gonzalez

The worsening outbreak of Covid-19 over the first quarter of 2020 has had a significant and growing impact on international supply chains. Industry research company IBISWorld has put together an impact statement covering the remainder of 2019-20, and beyond.

Office equipment leasing in the UK

Overview

  • A significant number of offices have begun working from home where possible, which is likely to reduce demand for industry services.
  • An overall reduction in general business activity in the economy will affect demand from several sectors.

Sector outlook

The industry is expected to grow over the five years through 2024-25.

Caution over the state of the economy after the UK leaves the European Union (EU) is expected to reduce business capital expenditure in the short term, potentially limiting industry demand as businesses postpone expansion plans.

However, external competition from firms selling office products is expected to soften as weaker business confidence encourages firms to rent equipment instead of buying it.

Over the five years through 2024-25, revenue is expected to grow at a compound annual rate of 1.6% to reach £1bn.

Opportunities for growth

Fairly low prices and ease in access to computers and peripheral equipment through finance deals are likely to encourage potential clients to make outright purchases.

However, delays to business expansions as a result of economic uncertainty surrounding the UK’s exit from the European Union could provide opportunities for rental and leasing firms. An anticipated overall rise in government expenditure is also expected to support demand for office equipment.

Despite a period of economic uncertainty, demand for office machinery and equipment throughout the UK may prove resilient, with growth in London particularly benefiting industry operators as new firms look to minimise costs given the rising price of commercial rent in the capital.

Many commercial developments in the capital are expected to boost the availability of office space in the City. This trend should encourage industry demand over the next five years.

The industry is also expected to benefit from higher outsourcing levels, particularly of procurement in government departments and large companies.

Large and small organisations will continue to rent and lease office equipment to free up cash flow and allow excess funds to be invested elsewhere.

These factors are expected to have a positive influence on the number of companies seeking to rent and lease office equipment, which will directly benefit industry players.

New competition

Competition from new office equipment and computer products, used office equipment and furniture, online auction sites for office equipment and furniture and clients’ internal procurement divisions is expected to continue over the next five years, limiting the growth potential of the industry.

Over the past decade, an increasing number of businesses and government departments have outsourced office equipment procurement, a trend that is expected to continue in the future, supporting ongoing industry growth.

The cost of acquiring electronic equipment is expected to increase in the short term, which could provide opportunities for industry operators because small businesses are unable to make outright purchases.

The availability of finance deals is expected to encourage more firms to purchases equipment outright.

Nevertheless, lower purchasing costs will also enable industry firms to offer more attractive rental and leasing prices, which may help to offset this potential fall in demand.

Additionally, some imported products may be affected by price hikes due to weak pound, encouraging demand for renting and leasing.

Steady expansion

Enterprise numbers are expected to fall over the next five years as price competition intensifies.

A high level of price-based competition is expected to affect profit margins, which is likely to force a small number of operators to exit the industry in the coming years.

The number of industry enterprises is forecast to fall marginally over the five years through 2024-25, indicating limited expansion in business activity. Industry employment is anticipated to increase at a compound annual rate of 0.9% over the same period.

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