Leasing does not sufficiently
demonstrate it’s an industry worth investing in as the economy
stabilises, writes Lindsay Town
The world of Asset Finance and Leasing in the
UK has been enjoying more than its fair share of soul searching in
recent times. Many comments are made and views expressed, so
it seems a shame not to join in.
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If one starts from a simple point to set the
scene: As an industry that facilitates the purchase and sale
of all types of tangible assets we should be at the forefront of
any recovery and, moreover, be seen by external observers as a
critical part of the recovery of UK plc. We are not. We
are in fact at far more serious risk of becoming a
marginalised play in the world of corporate lending, absorbed as a
mere product within a wider corporate lending world, and
increasingly few outside the industry appreciate our vital ability
to be the oil on the wheels of the sale and purchase of capital
goods.
Perhaps my views are extreme for the sake of
the points I want to make, but I doubt many would deny my
observations in their entirety. As the economy turns in its
cycle towards, hopefully, a more stable growth pattern and capital
spending recovers, we need to be on the front foot to re-establish
the industry as the powerful force that I believe it is.
However, we can not manage to achieve that unless we ensure that we
are prepared and equipped to take on the new order in the financial
world. My concerns are many, but some stand out as clear and
present threats to how we will as an industry move forward.
The key ones to my mind are as follows.
Much has been said about funding, both primary
and secondary. Whilst secondary trading occurs, in the UK in
particular, it is sporadic and essentially bilateral. The
development of an active secondary market is a need that will
increase enormously as the new capital regulations start to make
their impact felt. Much has already been said on this subject by
several industry colleagues. However, far more of a risk is
the ability of the industry to attract new funding sources,
irrespective of it being primary or secondary.
Transparency and access to information
are key to survival
Therefore, inextricably linked to
funding, my concern is how we present ourselves and the business
that we do to the outside world. If one looks at some more
developed funding markets one can see a wealth of data and
“industry standard practice”, not just an analysis of new business
volumes and broad sectors, which gives potential funders and
investors an insight into trends and expected performance as well
as predictable control and governance of transactions. We do not
have that degree of transparency or operational predictability, and
that puts us at a major disadvantage in the changing world that we
face.
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By GlobalDataIn the UK we do not have the detailed industry
wide performance data in a reliable and sustainable form and so how
could potential investors set benchmarks for what we do? How
do we assert the quality of what we do if as an industry we cannot
prove the point? How would a new potential investor measure
our business against alternative opportunities?
Looking slightly wider, are we
forgetting some of the basic points of our trade? Whilst the
continuing move towards vendor/manufacturer related business is
welcome and the move, in the UK at least, to products and
structures focussed more on the sale and use of an asset is right
and proper, I can’t help but wonder if we have forsaken some of the
fundamentals in the face of increased internal and external
“challenges”. In particular, asset verification has become a
particular concern of mine when we look at some of the problems of
the recent past. Again, we need to demonstrate unequivocally
that we are an industry worth investing in and a key part of that
is the protection and control of the assets that we finance.
None of the foregoing is anything to do with
strategic alignment to our stakeholders or yields on business or
returns on equity, all of which are vital and the subject of other
important debates. What my concern is relates to conveying to
both our stakeholders and to our potential sources of funds that we
are a cause worthy of serious attention. To look to the strategic
horizon and ignore the tactical fundamentals is in my view a
perilous path.
