The last Budget in the UK
before the general election had few surprises and no immediate
impact on lessors, reports Antonio Fabrizio.
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The UK leasing industry has
made no secret of its disappointment at this year’s Budget, the
last before the general election expected in May, delivered by the
Chancellor, Alistair Darling, on 24 March.
For the Finance & Leasing
Association (FLA), despite the announcement of a first year
investment allowance for small firms doubled to £100,000
(€111,000), the 2010 Budget has missed its chance to improve the
situation for SMEs looking to invest.
Julian Rose, head of asset finance
at the FLA, said: “While any support for business is welcome, the
government’s announcement of an increase to the annual investment
allowance has missed the opportunity to help the majority of
cash-strapped British businesses to invest via leasing.”
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By GlobalDataRose added: “The number of
businesses that would be able to use the extension from £50,000 to
£100,000 is very small; it might only impact a few thousand
companies.”
Nevertheless, the FLA is more
confident about the future. The association has been lobbying for
some time to get the first year allowances extended to include all
types of leases – at the moment these allowances cover hire
purchase and long funding leases, but not operating leases.
Rose said: “We have been making
some progress with the Treasury in the last few weeks on that, and
there’s a team at the Treasury looking at how in other countries
the tax works for leasing, and how to overcome some of the
practical difficulties that would occur if it was extended to
leasing.”
As this is still work-in-progress,
the FLA didn’t expect it to be in the 2010 Budget, but believes
that an incoming government will need to address the issue
properly.
“Whoever wins the election needs to
look seriously at alternative finance options in a credit-poor
economy,” Rose said.
Alongside the FLA, many in the UK
asset finance industry have shared similar views regarding the 2010
Budget’s real effectiveness.
According to Edward Rimmer, CEO at
Bibby Financial Services, the Chancellor’s package doesn’t go “far
enough to help UK businesses play their part in driving economic
growth”.
He said that the proposal to get
state-owned banks RBS and Lloyds to free up half of a £94bn credit
package to improve access to finance for SMEs, in principle,
recognises that “viable businesses are still struggling to access
credit”.
However, he questioned whether
“this will really ensure that business owners know where to go or
are truly able to use this stimulus to get the cash flowing”.
“With so many businesses struggling
at the moment, and little sight of a major economic recovery in the
short term, it is vital the government provides a package of
support to help all businesses, whatever their size, in order to
sustain the lifeblood of the economy,” Rimmer added.
For Rose, this proposal needs to go
hand in hand with a review of capital requirement regulations, and
any new measure should “continue to recognise the relatively low
risk of leasing, because that will help banks to lend to SMEs”.
Alistair Darling’s announcement of a staggered fuel
tax rise (in three stages between April and January 2011 rather
than in one go) has not received a warm welcome either.
Ken Trinder, head of business
development at automotive software house epyx, said that the
announcement meant some “slight relief for those running company
cars and vans, even if those penny rises are likely to look small
compared to the underlying diesel and petrol price rises that we
are currently seeing”.
Hitachi Capital Vehicle Solutions’
head of operations, Tim Bowden, added that while partially
deferring the 3p fuel duty increase was positive, the government
“did not reverse the previous increase put in place when VAT was at
15%, so this still represents a double blow for motorists”.
John Lewis, CEO of the British
Vehicle Rental and Leasing Association, concurred that the move
would give “some respite”, but added: “In reality, they are still
applying the thumbscrews, just a little more slowly.”
Lewis said that, on the whole, the
Budget statement had “precious little for road users” and was
mostly relying on the expectation that the tax changes announced in
favour of cleaner vehicles would rapidly increase the uptake of
more environmentally-friendly cars and vans.
Indeed, he said that the
Chancellor’s decision to halve company car tax for ultra-low carbon
cars was a “nice gesture”, but that it would be more effective in
the future, as company car drivers “will struggle to find a
suitable ultra-low carbon car at the moment.”
Similarly, he said that the annual
£500 VED rebate for operators buying Euro 6 compliant vehicles was
good in principle, but added: “Where are people supposed to buy
them? This is another green incentive that is great in theory but
will make little or no difference for businesses any time
soon.”
From a “green” perspective, the
2010 Budget has also included the creation of a “green bank” with
£2bn to spend on greener energy and transport initiatives.
But Rose said it was unclear how this could affect leasing. He
said: “I would be looking for clarity regarding what the bank is
there to achieve, for example, what this green bank would do that
couldn’t be done through the existing structures. I think the
answer to that has to be a fiscal incentive, but at the moment it’s
not clear whether there will be any fiscal incentive.”
Alistair Darling photo courtesy of Agencia Brasille
