The fifth annual Norton Rose Fulbright The Way Ahead Transport Survey (which details over 850 responses from a range of companies involved in the global aviation, rail and shipping sectors) indicates that, despite some ongoing concerns, optimism is growing in the transport sector, buoyed by positive views on economic indicators such as fares and freights, passenger numbers and freight values, and infrastructure investments.
The good news is that 75% of respondents from the global transport sector considered current market conditions to be positive for their business.
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Almost half of respondents identified new business opportunities and approximately 20% pointed to the return of economic stability as the single most significant reason for their optimism.
In the aviation and shipping sectors, respondents considered the most advantageous investment opportunities for their sector or business were additional aircraft (25%) or ships (22%). Twenty-nine per cent of rail respondents considered infrastructure investments to be the investment of greatest benefit to them.
Unsurprisingly, the survey indicated that businesses have a continuing need for funding. Almost half of the respondents (46%) reported having sought or being offered funding in 2013 (compared with 45% in 2012). As with 2012, the survey found the two greatest concerns for businesses were the cost of that funding (54%, compared with 67% in 2012) and the availability of funding (44%, compared to 52% in 2012). Fewer than 30% of respondents indicated they were satisfied with their current access to funding.
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By GlobalDataDespite a loosening of the funding market since 2012, difficulties in raising finance remain and it’s perhaps unsurprising that there’s a growing interest in new sources of funding, in particular private equity and, in shipping, hedge funds, among respondents.
When asked what would make funding more readily available, the most popular option (selected by 26%) was a more beneficial view of assets for risk weighting purposes.
There were also calls for government support in the form of guarantees or soft loans, and for governments to set up specialist funding institutions.
Tax incentives
There was little interest among respondents in tax incentives for lenders (5% in rail and 7% in shipping and in aviation considered this to be a good idea).
The survey did not differentiate between leasing and other types of funding.
Given that the effect of CRD4 is largely to remove deferred tax assets which rely on future profitability of a business from Tier 1 capital, it’s likely that concerns about the impact of risk asset weighting on the cost of funding are particularly relevant for businesses which rely on leasing.
An example of deferred tax assets might be those held by a leasing company as a result of its capital allowances position.
However, the UK Government has sought to reduce the cost and improve the availability of lease finance by extending the Funding for Lending scheme to cover certain leases.
While this has helped reduce lessees’ borrowing costs, independent leasing companies are unable to access the scheme.
It will be interesting to see whether the scheme is expanded or extended beyond January 2015.
Judy Harrison is a senior associate with Norton Rose Fulbright
