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.
Go deeper with GlobalData
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.
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By GlobalDataHowever, 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.
Richard Ryan
A full article on the findings from this
research will be published in the February edition of Leasing
Life.
