Total asset finance new business (primarily leasing and hire purchase) fell by 16% in January 2021 compared with the same month in 2020, according to figures released by the Finance & Leasing Association (FLA).

The plant and machinery finance sector reported a fall in new business of 3% in January compared with the same month in 2020. The IT equipment finance and business equipment finance sectors reported falls in new business of 32% and 30% respectively, over the same period.

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Geraldine Kilkelly, director of research and chief economist at the FLA, said: “The asset finance market provided more than £2.1bn of new finance to businesses in January despite the ongoing restrictions in response to the Covid-19 pandemic.

Several sectors – agriculture, printing equipment, machine tools – reported higher levels of new business than in January 2020.

“If the UK economy is going to improve its long-term growth potential, there needs to be a significant increase in investment by businesses that enhances productivity and builds a sustainable future.

“With as much as 40% of equipment investment funded by FLA members, the asset finance market will play a vital role in helping businesses achieve these goals.”

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Consumer car finance

Meanwhile, the consumer car finance market reported a fall in new business volumes of 35% in January 2021, compared with the same month in 2020, the FLA said.

The consumer new car finance market reported a fall in new business volumes of 38% in January compared with the same month in 2020. The percentage of private new car sales financed by FLA members in the 12 months to January 2021 held steady at 93.2%.

The consumer used car finance market reported a similar fall in January as new business volumes decreased by 34% compared with the same month in 2020.

Geraldine Kilkelly said: “The impact of the latest UK-wide lockdown restrictions has not been as severe as the first lockdown introduced last March with many dealerships able to offer click and collect or deliver services.  The value of new business in the consumer car finance market is expected to fall by 16% in Q1 2021 as a whole.

“Our latest research suggests that once showrooms re-open there will be a strong recovery in the consumer car finance market, with the value of new business expected to grow by 17% in 2021, and a further 12% growth forecast for 2022.”