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.
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“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.”
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By GlobalDataRichard 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.”
