A surge in winter
business by asset finance brokers in the UK has consolidated
recovery, but it still has a long way to go. Nick Huber
reports.

 

Line graph showing broker-introduced finance, December to FebruaryThe
recovery of the asset finance industry has been boosted by strong
demand from small and medium-sized enterprises (SMEs) – who have
complained about difficulties in obtaining bank loans – and
engineering and transport companies that have needed finance for
new assets.

Broker-introduced asset
finance was worth £714m (€808m) in the three months to February
2011 – a 31% rise compared to the same period last year – according
to figures from the Finance & Leasing Association
(FLA).

In the last year before the
banking crisis shook the global economy, broker-introduced finance
was worth £941m in 2007 to 2008. The market then plunged by 41% to
£665m in 2008 to 2009 as credit markets seized up.

Julian Rose, head of asset
finance at the FLA said the latest figures for asset-finance
broking, based on a survey of 56 UK asset finance companies, showed
that the industry had “turned a corner”.

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Rose said: “Commercial
vehicles, plant and machinery, and business equipment have led the
charge, showing the most growth. Brokers have a role to play in
helping small businesses to find the best deals available across
the market.”

Adam Tyler, chief executive
of the National Association of Commercial Finance Brokers (NACFB),
said that recent increased activity among SMEs indicated that they
were investing in new equipment, which would boost the
economy.

Senior figures in the asset
finance industry said the FLA figures highlighted the resilience of
asset-finance brokers, who they claimed had weathered the economic
downturn better than firms providing asset finance directly to
customers.

Chris Stamper, chief
executive of ING Lease UK, the UK’s largest funder of broker
finance, said: “Three or four years ago some competitors were
saying that broker asset finance wouldn’t last, but it has done
better than any other sector in asset finance since the banking
crisis.”

After the banking crisis,
some of the biggest leasing companies, many of them part of high
street banks, axed thousands of jobs in an effort to cut
costs.

A retrenchment of some
leasing businesses, coupled with banks tightening lending criteria,
has therefore provided an opportunity for asset-finance brokers to
fill gaps in the market.

“Brokers can do the legwork
and get a good [finance] deal for the customer,” said
Stamper.

However, the fledgling
recovery in the asset finance market is likely to slow during the
rest of this year, with increased private sector investment
compensating for spending cuts in central and local government,
Stamper predicted.

Nick Simpson, director of
Yorkshire-based Asset Finance Solutions, remains cautiously
optimistic about the prospects for the broking sector.

Simpson said growing
speculation that interest rates will rise in the next year could
prompt more businesses that are planning to raise finance to fix
asset finance deals at a competitive interest rate now.

Many asset-finance brokers
are currently small operations. However, as the industry matures,
some experts believe that broker firms will become bigger, in order
to maintain growth and benefit from economies of scale.

This could see the emergence
of “super brokers” within asset finance, but not for at least seven
to 12 years, it was predicted at an industry conference earlier
this year.

Mark Picken, ING vice-president, speaking at the NACFB
asset finance seminar in March, said: “The days of the super broker
is still 7 to 12 years away. It will happen when smaller brokers
retire. Someone will have to soak up the contacts book of those
smaller, niche players who are writing their own books. Brokers
will pick up books off one-man bands.”