In July the Bank of England (BoE) released its agent’s report on credit conditions, up to and including the end of June: the time of the Brexit referendum.
The BoE said that its agents had stepped up the ‘intensity’ of their intelligence gathering following the EU referendum, particularly with mid-to-large corporates, to understand how businesses were responding, and planning to respond, to the Brexit result.
The agents found that many businesses were conducting hasty contingency plans, but were seeking to maintain ‘business as usual.’
The report said: “Uncertainty had risen and many felt there was a lack of information on which to base major decisions and that information might only become available with a considerable lag as future trading relations became clearer.
“As yet, there were few suggestions of disinvestment, such as exiting the United Kingdom in the near term, but there were a few reports of planned foreign direct inward investment being postponed.
“A number of companies were considering alternative European locations for aspects of their business, and some contacts within large international firms expected their continental European operations to receive a greater share of future investment than their UK ones.
“But some contacts mentioned the possibility of moving production back to the United Kingdom, or increasing the domestic sourcing of products, in light of sterling’s fall.”
The agents also found that credit conditions had tightened slightly in financial markets.
“…the early evidence indicated that banks’ appetite to lend had been maintained following the referendum decision,” said the report.
“There were reports that demand for credit was easing alongside lower expectations for investment spending.”
It seems as if we live in precarious times, where confidence is either decided, or lost.
What does this mean for lessors? Perhaps with hindsight we could dwell on the potential decline of bank-backed asset finance as part of a general bank freeze on lending, which is a possibility.
If there are questions about capital expenditure for businesses, then that is an area of interest for lessors. The real successes in this climate of uncertainty are the leasing businesses that are the most reactive to the challenges and offer products with real flexibility.
Business owners know that the key to growth is investment in their businesses, but they will need to have some element of security that they won’t bankrupt their business if they invest at the ‘wrong’ time.
So for the right leasing product and business, this ‘crisis’ could turn out to be an opportunity.