Peter Hunt analyses market statistics for the year to 30 September.
Highlights
Though not as strong as June’s figures, September’s quarter end volumes offered an increase over the previous two months.
In so doing, FLA business finance volumes excluding big ticket showed small year-on-year growth (up 1.1%). Annual growth has been achieved in six of the last seven months, suggesting positive momentum within the market, albeit fairly fragile.
Having plumbed new depths in August with total market volumes of only £46m (€54m), big ticket (transactions over £20m) showed some improvement, with the £211m new business level representing a massive monthly change (up 361%) and the second highest monthly total in 2010.
Notably this is still more than £100m lower than the weakest month in 2008; with year-to-date big ticket volumes over 50% down on last year. In the 12 months to September, the big-ticket market totalled £1.8bn, under 10% of the total business finance market.
Consumer finance continues to look weak, with three-month moving averages staying stubbornly below 2009 figures and year-to-date volumes 6% down on last year.
Overall motor finance continues to grow, though this appears to be more driven by consumer than business financing despite the cessation of the government’s scrappage scheme.
Motor finance in the business sector grew 3.3% in September compared to last year, but the three-month moving average figure (used to remove some reporting distortions and monthly spikes) has moved marginally downward after strong growth early in the year. Total business registrations were up 5% in September, driven by the fleet sector. For the full year, the Society of Motor Manufacturers and Traders predicts total registrations will exceed 2m cars, up on 2009.
The aggregate finance volumes of non-car assets exceeded £1bn for the third time in 2010. Not surprisingly, the other two occasions were March and June quarter ends. There was a noticeable spike in plant and machinery financing, which at £331m posted its best month this year.
By contrast, at only £25m, aircraft, ships and rail posted its lowest monthly total for over three years (£1m lower than the previous month). The figures for international assets have remained around 80% down on last year’s volumes throughout 2010. IT financing remains in the doldrums, still over 20% down, year-to-date.
Sales finance presented very strong September figures to take 28% of the market (its highest for the year), while broker-introduced business slipped to 13% (equalling its lowest for the year) while direct finance slipped below 60% for the first time in over a year. It will be interesting if these are one-off figures or whether a new phase of the recovery is emerging, perhaps with greater lending capacity becoming available to non-bank funders.
Comment
While FLA figures remain steady, positive but perhaps inconclusive, a snapshot from the wider economy suggests the general outlook is quite positive. Growth of light commercial vehicles continues (up 24% in September and 18% year-to-date) though truck registrations are down, coach registrations are up, but bus registrations are down.
A recent confidence survey by the British Print Industries Federation suggests a positive outlook in that sector, with orders and production showing a gradual improvement. A similar survey by the Manufacturing Technologies Association highlighted a likely material increase in investment levels.
Figures from the construction industry highlight recovery, but still a long way short of pre-recessionary volumes. Third-quarter compulsory liquidations and creditors’ voluntary liquidations in England and Wales fell 14% on last year. Many of these factors should lead to improved trading conditions for finance companies in 2011.
The author is a partner at the consulting and services firm Invigors, peter.hunt@invigors.com
See also: FLA data, 12 months’ view
