Signs that confidence is returning to the leasing market have emerged as lessors predict rising volumes and declining bad debt.
However competition in the marketplace means that margins are seen to be more volatile with a rise in the number of people expecting them to change.
The Invigors asset finance business confidence survey, supported by Leasing Life and Leaseurope, was undertaken in December 2010, and is the fifth in a series of surveys aimed at tracking market confidence.
A total 86% of respondents expected new business volumes to rise in the first six months of 2011, compared to 74% in the June 2010 survey and 65% in the November 2009 survey. Just 5% anticipate a decline in new business volumes in the first half of 2011, and 9% expect no change.
At 41%, the proportion of respondents expecting bad debt to decline in the next six months was about the same as in the June 2010 survey. A total of 18% said that bad debt will increase in the first half.
Those expecting margins to decrease over the next six months made up 35% of respondents, compared to 24% in June 2010, and 15% in November 2009. The proportion of participants expecting no change in margins was 42%, down from 55% in the June 2010 survey.
However, the combination of new business growth and improved management of bad debt is offsetting the pressure on margins. A total 80% expected profits to increase over the next six months compared to 70% in June 2010 and 50% in November 2009. Only 6% now believe that profits will decline.
It might be expected that a more benign business environment would lead to an increase in expenditure by leasing companies though here the picture is more mixed. Operating expenses are increasing in some of the organisations surveyed: 28% of respondents expected these to increase over the next six months compared to 11% in the June survey. Nearly half of participants believed that operating expenses will stay level and a quarter thought that they would decrease.
Expenditure on marketing appears to remain under tight control with 25% anticipating spend to increase, down from 36% in June 2010. The majority, 57%, expect spend over the next six months to remain unchanged.
The outlook is more optimistic for training, with 37% of respondents expecting expenditure to increase, up from 25% in the previous survey. Almost half predicted no change.
The biggest shift in expectations has been on systems expenditure, with 65% of respondents anticipating spend on IT systems to increase over the next six months, compared to 36% in the June 2010 survey. The majority of the rest, 32%, expect no change.
Investment in sales forces continues. Half of those surveyed in December believe that sales staffing levels will increase in the next six months, up from 46% in the June 2010 research. Most of the remainder, 47%, expect no change. Numbers of non-sales staff also look set to increase, though the growth here is not as widespread as for sales staff. Of respondents to the latest survey, 31% expect non-sales staff to increase, up from 25% previously; 47% anticipate no change; and the balance believe staff numbers will decline.
Given a more positive business environment it was not surprising that 80% of those surveyed were more optimistic about the prospects for their business in 2011, a significant increase from the 56% holding the same view back last June. After two years of recession and stagnation, 2011 could be the year in which European asset finance turns the corner.
A full article on the findings from this research will be published in the February edition of Leasing Life.