Peter Hunt analyses market statistics for the year to 31 August
2009
Highlights
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After faint signs of improvement in
July volumes, the FLA’s new business figures for August bring the
industry back down to earth.
Compared to last year, business
finance volumes (excluding big ticket) dropped nearly 36 percent to
£1,044 million (€1,153 million), lower than any month for a number
of years. Big ticket was down 62 percent and though it was up on
last month’s total, it was lower than the preceding 28 months.
Consumer finance also dropped, but
less than business finance. Motor finance was down 12 percent,
though the business finance element of this total was down 19
percent, broadly in line with registrations (overall car
registrations were up 6 percent in August but this was driven by a
50 percent growth consumer registrations benefitting from the
scrappage scheme). Other business assets fell 43 percent.
The two largest contributors to the
‘Other assets’ category, commercial vehicles and plant &
machinery, continue to suffer. Commercial vehicles were down 34
percent on August last year (comparable but marginally better than
registrations), while plant & machinery fared even worse, 54
percent down.
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By GlobalDataYear-to-date (YTD) these financing
segments are down 31 percent and 45 percent respectively (see chart
below). With the exception of property (a small market with £94
million new business year to date), all asset classes are showing a
YTD reduction in business of over 20 percent.
Having achieved only £108 million of
new business YTD, the receivables finance market is down 89 percent
on the same point 2008. It seems likely that it is now only served
by a small number of funders, quite possibly with a bias towards
captive finance providers.
This apparent paucity of supply may
create a new business opportunity, assuming end-user credit and
performance risks can be managed and mitigated.
After last month’s apparent spike in
direct finance activity (possibly a reporting issue as the previous
month was unusually low), relative volumes returned to more typical
levels. Direct finance represented 62 percent of business finance
volumes, with the result that broker volumes at 16 percent of the
market and sales finance at 23 percent.
With connected but different supply
side weaknesses operating in all three distribution channels
(witnessed in October by further funder exits from the broker
market) it will be interesting to see how these relative volumes
change over the coming months.
Latest national statistics reflect
the FLA statistics, with business investment in Q2 down 22 percent
on last year and 10 percent on the previous quarter. Notably for
asset finance companies, some sectors had experienced investment
growth – in particular mining and quarrying, energy production,
agriculture and forestry.
Overall though, the Bank of England
Agents Report for September highlights a continuation of weak
investment intentions (though showing some improvement on recent
months), combined with a stabilisation of output in the service and
manufacturing sectors and continued shrinkage of the construction
sector.
Comment
In September, many firms in and
serving the asset finance sector commented that activity levels
were materially higher than in previous months. Let’s hope this is
reflected in FLA volumes, buoyed by the new car registration plate
and the last month of availability for the Government’s Reduced
Pollution Certificate incentive on Euro 5 trucks.
