Funders continue to fight shy of construction
after sharp falls in financing volumes across the sector in 2009
and 2010.
Oversupply, lower-than-expected residual
values and a rise in customer credit risk have all played their
part in spooking funders.
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The fall in financing has mirrored a drop in
sales of construction equipment of between 30% and 80% across
different European markets. Capital expenditure on construction
equipment in Europe was €10bn in 2009, down from €19bn in 2007.
Chris Boobyer, partner at consultancy
Invigors, said: “The problem is the construction companies have had
it really tough, therefore banks and asset financiers are nervous
about the sector.
“If they’re nervous about the sector, they’re
less keen to invest and if they’re less keen to invest, that goes
against initiatives to try to get the economy running again.”
The challenges in construction equipment
financing are analysed in a new report, European Yellow Goods
Leasing, produced by Leaseurope, the European leasing association,
in partnership with Invigors.
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By GlobalDataOversupply is identified in the report as a
significant challenge. It has led in some cases to resale values
being well below residual values set by finance companies, or the
buyback positions set by suppliers.
Boobyer said: “Residual values set 3 to 5
years ago are coming to the end of their lease term and will result
in losses for whoever took the original risk position in the
asset.
“Asset financiers with assets coming off
contract with residual value are going to find they’re selling in a
depressed market, so they make less and that further depresses
lending appetite.”
