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June 17, 2013updated 12 Apr 2017 4:02pm

Trends in transport leasing identified

A potential increase in finance use is one of the findings in the Norton Rose Fulbright transport survey

By Judy Harrison

A potential increase in finance use is one of the findings in the Norton Rose Fulbright transport survey

The annual Norton Rose Fulbright The way ahead transport survey indicates a degree of confidence may be returning to the transport sector.

The good news is that, notwithstanding the economic climate, 35% of respondents have either ordered, or are about to order, or have taken delivery of, new aircraft, new rolling stock or new ships.

Also encouraging is the news that 56% of respondents are using, or considering, new sources of finance, of which 17% are looking at raising money through leasing for the first time.

The interest in new forms of financing including leasing is perhaps not surprising given that last year’s survey found 40% of businesses considered their greatest challenge would be to find sources of finance, with more than 40% believing the greatest threat to their business would be the cost of that finance.

Demand for leasing from businesses that had not raised finance this way before was particularly strong in Central and South America (where 33% of respondents are considering using leasing for the first time), Africa and Asia-Pacific (where 25% and 24% respectively were looking at leasing).

Finance leasing is attracting interest from 24% of aviation respondents, but only 15% of shipping respondents and 8% of rail respondents.

One cautious note is that aviation and shipping are strongly affected by high fuel costs.

This has led to the development of new aircraft and vessel engine technologies, which promise to deliver significant fuel savings. However, there is uncertainty about the effect which the new technologies will have on the lease rates and charter rates for older, less-efficient equipment, and therefore on their residual values and ease of financing.

There are further positives to be found in responses relating to new orders. Among respondents with existing orders in place, the strongest response was from those based in the Middle East (50% had new orders) or Asia-Pacific (47% had new orders).

The lowest proportion of respondents with an order in place is found in Europe (30%), with North America (31%) only fractionally ahead.

New orders should be seen against the background of 42% of industry participants having increased their number of ships or aircraft, or their number of rolling stock vehicles, employed in their businesses between 2010 and 2012. Some 28% said there had been no change.

In addition 42% of participants noted an increase in their total capacity of assets employed (so, for example, an increase in the number of seats on their aircraft, the tonnage of their ships or the capacity of their rolling stock) between 2010 and 2012.

The 2013 Norton Rose Fulbright transport survey attracted more than 1,000 responses, and is the fourth time the law firm has conducted this survey.

It was carried out before the UK Government announced the Funding for Lending Scheme would be extended to cover certain finance lessors.

This is likely to have made leasing a more attractive option and to have increased the number of UK businesses considering obtaining finance through leasing.

Judy Harrison is a senior associate at Norton Rose Fulbright

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