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November 29, 2010updated 12 Apr 2017 4:18pm

Smaller state equals a bigger opportunity for lessors

The comprehensive spending review marks the beginning of a radical redistribution of service provision from public to private," said George Lynn, CFO of Angel Trains and chairman of the Finance and Leasing Associations (FLA) asset finance division.

By Claire Hack

Government spending cuts could result in more business for lessors as the measures begin to bite.

Some lessors have already reported a rise in demand from the public sector.

“The comprehensive spending review marks the beginning of a radical redistribution of service provision from public to private,” said George Lynn, CFO of Angel Trains and chairman of the Finance and Leasing Association’s (FLA) asset finance division.

“I hope this provides a significant new market opportunity by way of refinancing existing equipment and the provision of new equipment.”

IBM Global Financing has experienced an increase in demand from public sector organisations.

Richard Bingham, UK and Ireland financing sales manager, said: “More organisations are looking to invest in projects which will drive out cost. A model provided by IBM that matches payments with expected benefits is proving an attractive means of investing to save.”

Richard Carter, head of equipment finance at HSBC, agreed that leasing companies would gain business. “There will be opportunities as companies position themselves to take advantage of difficult decisions local councils need to make as they attempt to maintain services, but perhaps shed the infrastructure,” he said.

David Martin, head of sales for the public sector at the UK arm of Siemens Financial Services, saw an opportunity as capital budgets of bodies such as the UK health service come under pressure.

Martin said: “The leasing option will be much more attractive with such suppressed access to capital. But the industry, and its representative bodies, need to mount a campaign to educate the public sector better about the benefits of alternative methods of financing, such as leasing.”

Such education could cover concepts such as built-in upgrade options that guard against sudden technology shift.

“As public sector organisations are forced to seek financing options for replacements and energy-efficient alternatives, the leasing industry needs to explain what we have to offer,” Martin said.

Some leasing companies were more uncertain about the impact. Compass Business Finance director Bruce Nelson said: “A total £113bn spending cuts and tax rises by 2015 is strong medicine. We will find out in the years ahead whether we have found a panacea, or a poisoned pill.”

“Convincing the banks they should support this development hasn’t been easy. Low interest rates certainly help sweeten the pill for businesses considering capital investment.”

Carter added: “We will monitor and watch carefully. The devil is in the detail and that will develop in time.”

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