Growth Trends Show Businesses are Investing Despite Economic Uncertainty
The UK economy grew by 0.5% in the first quarter of the year and only 0.2% in the second, which was below Government expectation and has prompted recessionary fears. But in contrast, the latest figures from the Finance & Leasing Association (FLA) show how asset finance continues its growth in 2019.
Whilst the OECD’s Business Confidence Index has recorded declines in 2019, the six percent growth in asset finance reported for the first half of this year is positive because it indicates that despite Brexit uncertainty, the falling pound, and increasing government borrowing, companies are continuing to invest and that asset finance continues to be popular with businesses of all sizes.
How has asset finance grown?
The types of asset funded and the financial tools utilised show some variations, for example the volume of car finance year on year decreased as did operating leasing, but those decreases can be attributed to the well-publicised challenges faced by the motor industry in terms of vehicle availability (due to emission measurement). Decent increases, double digit in many instances, were recorded against a range of asset classifications.
The broker industry has played a significant role in supporting UK businesses with that channel posting a 15% increase in originations against the prior year.
Of the £34 billion total new finance provided to businesses in the first six months of 2019, more than £10 billion went to SMEs and this is perhaps the most “hopeful” indicator that UK companies are readying themselves for the opportunities and challenges that the UK, post-Brexit, will experience.
Utilising asset finance can be an important way of making investment whilst protecting business capital. In these uncertain times, access to “cash”, or ensuring cash flow, is likely to be a high priority for most small to medium businesses.
Annual Investment Allowance
Interestingly, and perhaps surprisingly, the growth in asset financing does not appear to have been driven by the increase in the Annual Investment Allowance, which was a government stimulus designed to encourage business investment. Companies can claim the increased allowances on many types of asset, including plant and machinery, computer equipment and business vehicles (excluding cars).
It has been reported that many small businesses are either not aware of the increased allowances, or perhaps view them as overly complicated to claim. If the awareness issues are addressed then there could be scope for further growth in 2019 and 2020.
For further information about the Annual Investment Allowance, or to talk about your asset financing requirements, contact us here or call 20 7520 9450.