Quality decision making and
private sector recovery are expected to keep sector afloat in 2011,
but customers are cautious about commitment. Vicky Meek

Photograph of an office printer

Until recently, businesses were
cutting costs and laying off staff as they battened down the
hatches and sought to weather the economic storm. The office
equipment leasing market took a hit as a result.

“Back in October 2008, we realised
were facing the toughest market in the 20 years I’ve been in
business,” says Jeremy Hall, CEO of brokers WestWon Capital. “The
recession smacked me in the face and said: ‘Hello, I’m here to

Even as we emerge from recession,
business managers still have in mind the memory of having made
redundancies, meaning that new spending is hard to justify.

“Companies have done everything to
cut costs,” says Hall. “They are not taking on more debt or

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“How can they buy new equipment
when they were letting people go just six months ago?”

“Upgrading has slowed down
slightly,” agrees John Barter, managing director of Oak Leasing. “A
while ago, you could bet that a copier would be upgraded after
three years – it’s longer now and you see more extensions.
Customers are taking the view that if something isn’t bust, then
why change it, and if equipment is not critical to their business
then they think long and hard before spending money on it.”

The market has been affected
further by bad debts, which have left many lenders with little
choice but to bow out, and by poor practice among some

The last two years have seen a
dramatic fall in the number of organisations willing to lend to
this part of the market.

“The smaller funders have now
gone,” says Barter. “If you look back to what the office equipment
market was like eight to ten years ago, it’s now devastated. The
tier 1 funders have gone from being a group of up-to-ten, to more
like three nowadays.”

The other issue is that, as with
the general business community, suppliers have had to lay off sales

“There have been top-level
changes,” says Hall. “Many suppliers have had to cull sales staff
and so they have been less able to go after new business.


Kit for

“Many resellers have focused on
selling to existing customers. This is one of the key reasons why
the office equipment market is well down on pre-crisis levels.”
It’s hardly surprising, then, that the business equipment leasing
sector has seen something of a slump, despite some lenders
remaining on the scene.

As Chris Stamper, CEO of ING Lease
says: “The office equipment market is down generally and we have
seen this reflected through business at ING Lease UK.

“However, margins are much the same
as they were 12 months ago, as is our risk appetite for this

In the 12 months to 30 September
2010, £1.5 billion of business equipment leasing was written in the
UK, a six percent fall on 2009 figures, according to the Finance
and Leasing Association.

However, there are signs that
things are picking up slightly. The FLA statistics show that the
amount of leasing business in this sector was up by 14 percent in
the three months to 30 September 2010, and September alone saw a 21
percent increase on August.

While vendors have had to focus on
existing customers, some lessors are finding that this is
encouraging more efficiency in the way contracts are managed.

“Vendors have worked very
effectively at managing their portfolios and helping customers
upgrade their deals at the earliest opportunity,” says Peter
Austin, general manager at Siemens Financial Services. “While this
is acting as a short-term substitute to writing pure new business,
it shows better management of the upgrade cycle.”

CIT argued that while upgrade
cycles have not changed significantly, the emphasis for vendors is
to deliver cost efficiencies by improving equipment

Julie Henehan, CIT UK sales
director, says: “We have begun to see more proposals for larger
projects as customers reach critical tipping points with their
existing technology cycles, or are now looking to invest in new
technology that will deliver efficient benefits.



In some parts of the market new
business is starting to be written.

Austin says: “There are now healthy
levels of new equipment business being signed. This is in contrast
to nine to 12 months ago, when the UK was in recession and
businesses were more reluctant to commit to new equipment
contracts. We’ve seen growth since March 2010 and we’re seeing
numbers pick up as the market recovers. However, the market has to
work harder and smarter to achieve that growth.”

Such growth is encouraging
operators like Siemens to take advantage of the opportunity as
businesses begin to grow again following an extended period of

The company has also set its sights
on new markets, particularly in the emerging economies of Brazil,
Russia, India and China.

“There has been a liquidity
shortage in the market and we had to be more selective early on in
the credit crisis,” says Austin. “However, we are now focusing on
ambitious growth for this year and beyond. Our plan is to grow our
balance sheet in the future by going into new markets in Europe and
the rest of the world, building on our strong position.”

As well as targeting new geographic
markets, Siemens is looking to capitalise on the growing trend to
cut energy usage, both as a cost-cutting measure and as part of
being a responsible business.

Austin says: “One of the drivers in
the market for new products is an increasing awareness of low
carbon-emitting products. We are writing more and more business in
this area. There has been significant government encouragement over
the last few years to motivate businesses to buy greener products
and this may change.

“However, the green agenda is now
integral to all business decisions, including those surrounding
equipment, and many businesses are starting to see that the
reduction in energy costs can more than offset the cost of a lease
on greener equipment.”



Others are reporting a rise in
general interest in new equipment leases.

“We’re seeing more demand from
office equipment suppliers wanting to understand the leasing
market,” says Steve Dexter, sales director at Lease UK. “That
hasn’t happened for some time. They are finding that customers who
need new equipment don’t want to spend money up-front and they
don’t have access to bank finance and so they are looking at
leasing it.”

At the same time, funders are
slowly changing their position on the office equipment market, in
part because the risk of default has waned over more recent

“The way we look at contracts has
evolved with the market conditions,” explains Austin. “During the
crisis, we naturally had to take a view on which sectors were most
likely to be affected by the downturn and to tighten our policy:
it’s only responsible to ensure we are writing good business. But
we have since adjusted our approach as the market has eased and
default rates have reduced.”

This loosening is starting to be
felt in the market. “Six months ago, lessors were simply telling us
what they wouldn’t do,” says Dexter.

“Even in the last month or so,
we’ve seen a shift. They are now starting to tell us what they will
do as they start to write more volume.

“The rates have become a little
more competitive and the underwriting is more welcoming now than it
has been for the last two years.”

Yet that doesn’t mean finance is
easy to come by. Those lessors left standing – Investec, BNP
Paribas, Siemens Financial Services and ING Lease, according to
various brokers – are looking much more closely at any business
they write.

“This market is very
supplier-driven,” says Alex Read, director at Portman Asset
Finance. “So funders are examining carefully who the supplier is,
and they want very detailed information on the make and model of
the equipment being financed and they price-check thoroughly.”

They are also considering which end
customers to finance with much more circumspection.

“Funders are looking more closely
at balance sheets than ever before,” reports Dexter. “And they
haven’t relaxed their criteria for newer businesses, so it remains
very hard to get funding if you don’t have a long trading

There are also some manufacturers,
such as Canon and Xerox that can offer leasing finance through
their captives. However, they are also being very selective in the
customers they offer funding to.

“They tend to be able to finance
straightforward deals,” says Read. “But they’ll pass on more
complex deals to their preferred partners.”

CIT reports that its risk appetite
and policy has remained consistent, but says the kind of
information it seeks from customer accounts closely reflects
economic conditions.

“We’ve invested heavily in our
scorecards and decisioning technology, which has allowed us to
provide fast and accurate decisions to our partners,” says Henehan.
“Current defaults and delinquencies remain low and are performing
above our expectations.”



Customers are now becoming more
wary about the contracts that they sign. A trend experienced by CIT
in some office products is for slightly longer contracts.

Vendors report that decision-making
is taking longer, with more senior members of staff becoming
involved in procurement and, in the public sector – likely to
experience a dip in office equipment spend as cuts start to bite –
organisations are keen to ensure that any leases they sign are
compliant with the relevant accounting standard (FRS 17) and with
local government regulations.

Overall, though, the picture is a
little brighter than 12 months ago. Increased caution on the part
of customers, vendors, brokers and lessors should improve the
quality of business being written in the future. And the signs are
that figures will be up on the last two years as the commercial
sector at least looks towards growth and the funding market

“We are definitely set for an
upturn in volume over the next year,” says Dexter. “There is more
willingness among suppliers to sell finance packages and that is a
good thing as long as business is written ethically.

“Customers will need finance for equipment as they start to grow


Changes in demand for office equipment since October

Office furniture

  • Large quantities of modern matching
    veneered furniture remain relatively popular at
  • Recent sales have shown that melamine
    furniture is very unpopular and generally does not sell at any
  • Large quantities on second user market
    over the past year due to a number of company closures.
    Consequently older or neglected furniture is unsaleable at

Boardroom furniture

  • Demand remains for high quality solid
    wood furniture especially where a complete set is

IT equipment

  • Continuing technological advances and
    reduction in new equipment prices results in limited demand for
    used IT equipment.
  • Demand strongest for new computer
    processors with flat panel up to 12 – 18 months old.
  • Older equipment and CRT monitors have
    become unsaleable with the majority going for
  • Demand still remains reasonable for
    modern laser printers.

Projectors and presentation

  • Limited demand for modern equipment,
    however older equipment is generally unsalable.


  • Limited demand for older
  • Many companies prefer to lease or rent
    new machinery with service and consumables contracts, resulting in
    low price sales to trade purchasers.

Phone systems

  • Demand for handsets, control units and
    racks, however majority of capital cost is in wiring and
  • Demand strongest for equipment from
    leading manufacturers including LG Nortel, Siemens and
  • Strongest demand at auction is from
    specialist traders as they can sell systems on with the added
    benefit of providing installation.

Bar chart showing the changes in demand for office equipment since October 2009

See also:

Contract clarity questioned