Peter Hunt analyses market
statistics for the year to 31 January.

 

Highlights

No doubt worsened by the bad
weather, FLA member business finance volumes continued their
downward slide.

Excluding big ticket volumes, business
finance notably fell below the £1bn (€1.1bn) mark, about half the
level of 2007 and 2008 and 18% below 2009. Even accounting for the
bad weather, this does reinforce the view that the rate of decline
is slowing, but does not suggest that business is quite at the
bottom yet.

Big ticket volumes fell still further,
starting the year with a new landmark low of £79m for the month,
down 82% on the same period last year. Slower into the downturn and
likely to be slower to respond to any upturn, 2010 prospects in
this market sector appear fairly bleak (in volume terms, at
least).

While down on December’s figures, motor
finance was 7% ahead of the same period last year, driven primarily
by consumer car finance which was up 18% on 2009. Business car
finance was down 11%.

Overall car registrations, which rose
for the seventh consecutive month, were up 30% on January 2009,
suggesting that the penetration of FLA members was lower than in
previous months. Registrations in the fleet market were up 24%
while in the business (smaller fleet) market they were up 9%.

The scrappage scheme continues to
distort the market, accounting for nearly 20% of January’s
registrations. Running until the end of March (or until the subsidy
runs out) the impact on subsequent registration and FLA numbers
will be worthy of note.

Direct finance appears to be bottoming
out quicker than the other business finance distribution channels,
no doubt driven by big bank lending targets. While sales finance
showed the greatest decline in
January, this may be misleading when offset against a stronger
performance in December.

Continuing supply side weaknesses and
limited funder choice in the broker market may be resulting in its
apparent laggard position. Relatively strong January performance of
HP/lease purchase may at least in part be explained by the direct
finance activity of bank subsidiaries.

Recent FLA stats give some minor hope
in terms of slightly improving arrears figures, with improvement
across all product types in the last 6 months.

Government figures also showed a
decline of 1% in insolvency figures for fourth quarter of 2009,
compared to both the previous quarter and the same period a year
previously.

 

Comment

While the upturn will
eventually come, the eternal optimists may be disappointed if they
believe that, after last year, 2010 represents a year of easy
stabilisation and growth.

Capital expenditure naturally tends to
lag GDP growth while economic capacity remains in the system, so
marginal GDP growth will not be immediately reflected in growth in
business finance volumes for FLA members. As a result, new business
volumes are likely to decline for a long while yet.

Portfolios are declining and a number
may yet become financially unviable, with equity owners looking to
other parts of the economy for more immediate growth, leading to a
series of sale or run-down decisions taken in the next couple of
financial quarters.

At the same time, improving arrears
figures, attractive margins and a more benign economic environment
over the horizon (with the likely return of asset values) seems to
be clearing the way for those with available funds available to
have an attractive 2010.

The author is a partner at the
consulting and services firm Invigors, peter.hunt@invigors.com

UK new business finance - January 2010

 

 

 

 

 

 

 

 

 

 

 

 

UK new business finance - January 2010

 

FLA new business finance – January
2010

 

£m

Month-on-month (%)

Change on same month last year
(%)

Year-to-date (£m)

Year-to-date change (%)

Rolling 12 months (£m)

Rolling 12 months yr-on-yr change
(%)

Business finance excluding big
ticket

981

-31.9

-17.6

981

-17.6

15,481

-29.5

Big ticket

79

-32.2

-82.0

79

-82.0

3,222

-48.1

Consumer finance

3,555

-24.6

-13.5

3,555

-13.5

52,583

-11.6

Motor finance (extracted from totals
above)

1,030

-21.3

6.5

1,030

6.5

16,417

-7.3

Source: FLA