Despite a slow down in leasing against 10 years ago, it is still
growing ahead of general economic investment
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Since 1998 the annual growth of leasing in Europe has
consistently outperformed the growth in capital investment
according to figures compiled by Leaseurope. In 2006, leasing
business grew by some 7.9 per cent compared to 7.3 per cent for
investment growth. The figures represent “a highly satisfactory
position” according to Jean-Marc Mignerey, chairman of Leaseurope
and CEO of SG Equipment Finance, indicating as they do that
“leasing has continued to flourish – principally by innovation”.
This is notwithstanding the fact that in 1999 leasing growth almost
23 per cent while general economic investment, which for the last
decade has remained fairly flat, saw a year-on-year increase of 7
per cent.
Karel Schellens, CEO ofDe Lage Landen, agreed. He said: “In
terms of developing leasing we are masters of our own destiny.
Faced with an ongoing decline in margins it is only by innovation
that lessors will be able to grow their business. Not all leasing
sectors, however, are as innovative as others. Car leasing, for
example, is still crying out for new products and new methods of
working.”
Schellens argued that the globalisation of leasing is itself a
form of innovation. “There is still, however, too much
volume-driven thinking amongst lessors,” he added. “Lessors tend to
copy each other’s business plans with too little strategic
discussion regarding the long term goals of their companies. We are
all guilty of being too comfortable with our current business
models – it is a common failing.”
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By GlobalDataSome lessors, Schellens believes, rely too much on technology as
an innovation in its own right. “Technology should be seen only as
a platform for innovation and change – ultimately it is
entrepreneurship together with innova
tion that is the essence of success in leasing.”
Alain Vervaet, CEO of ING Lease Holdings, pointed to leasing’s
contribution to the European economy as a percentage of gross
domestic product (GDP) (see chart 2). He said: “In 1994 leasing
volumes in Europe represented less than one percent of GDP – a
figure that rose to 2.6 per cent by 2006.”
Furthermore, leasing penetration levels have risen significantly in
Europe over recent years and have converged upon that of the US –
and even exceeded it. “In 2000,” Vervaet said, “the average leasing
penetration level in Europe was 16.06 per cent compared to 31 per
cent in the US (see chart 3). By 2006, 28.43 per cent of all
assets, less real estate, were funded in Europe by leasing – an
increase over the US’s 27.7 per cent.”
Rough ride ahead
Not all industry observers are as bullish as Mignerey and
Schellens regarding the immediate future of leasing. Douglas
McWilliams, CEO of the Centre for Economics and Business Research
(CEBR), told delegates that global world growth was forecast to
slow to 3.7 per cent in 2007 from 4.3 per cent in 2006 as the
credit squeeze and fall in consumer confidence amplifies the
slowdown in the US economy. There will be an inevitable knock-on
effect for leasing. “Things will not improve,” he said, “until a US
recovery starts another bull run from 2010. By that time China will
have returned to double-digit growth.”
McWilliams stressed that the European economy peaked in 2006
(see chart 4) but the credit squeeze and US slowdown will reduce
growth in the European Union 25 countries from 2.6 per cent in 2006
down to 2.0 per cent in 2009.
He predicts that the European economy will rebound to 2.8 per
cent by 2011 as export levels are revived and the benefits of
improved job creation feed through. Furthermore, the UK finance
sector’s output will be equally badly hit by the impact of the
credit squeeze and fall from 8.5 per cent in 2006 to a negative
growth figure in 2008 – rebounding to 6 per cent some two years
later (see chart 5).
