This year has been relatively positive for those in asset finance in the UK, in spite of political uncertainty around the recent general election and Brexit. Latest statistics reveal positive news for the industry as new figures from the Finance & Leasing Association show that asset finance for new business (primarily leasing and hire purchase) has grown by 2% in the month of October, when compared with October 2018. Asset finance is proving ever more popular in the UK, despite the doom and gloom about the state of Brexit and the volatile political backdrop.
In announcing the results, Geraldine Kilkelly, Head of Research and Chief Economist at the FLA, commented:
“The asset finance industry is on track to report a record level of new business in 2019 of around £35 billion. The industry has provided support to businesses keen to invest in new technology which will increase productivity and maintain competitiveness.
“Moving forward with the Brexit process should reduce some of the uncertainty that has weighed on business investment since the EU membership referendum. This will provide opportunities for further growth in the asset finance market in 2020.”
SMEs are leading the way
The leasing industry in the UK is dominated mostly by SMEs who sell within the UK. Larger companies tend to be more active in Europe, and only lease a small amount of business equipment. Small businesses are resilient, and they are looking to diversify the way they secure business funding, with traditional methods being shunned in favour of the likes of alternative providers of finance.
The total value of asset finance has increased by 6% for the 12 months to October, according to the Finance & Leasing Association figures. These numbers are particularly welcome going into 2020. The Conservatives’ win in last week’s General Election brought certainty to the markets, with the various “no deal” deadlines and Brexit extensions over the last year causing some companies to hold back on major investment decisions. The pound also jumped sharply once the exit polls were released, although for various reasons it has stabilised in the week since the election.
Brexit progress hoped for 2020
At one point the polls indicated there could be a hung parliament, fuelling fears this would continue the Brexit deadlock and further increase uncertainty into 2020. With his 80-seat majority, Boris Johnson has pledged to take the UK out of the EU, removing the uncertainty that has plagued the economy since the EU referendum in 2016 and hopefully provide even more growth opportunities in the asset finance market for the upcoming year.
The Prime Minister is also moving to lay legislation before Parliament preventing any further extensions to Brexit. If his plans pass, this would mean that the transition period for the UK leaving the EU would end in December 2020. The UK would then have one year to negotiate Free Trade Agreements with the rest of the world, or risk another “no deal” cliff edge- however, analysts say this is still relatively unlikely.
Keeping up with the issues
Asset finance has had a good year, proving the industry is robust in the face of uncertainty. Some analysts are optimistic that bigger companies may increase their equipment and vehicle leasing, and the figures show that SMEs have been the big users of asset finance, and there is no sign that will stop any time soon.
It’s also vital that the industry keeps itself aligned to important issues going forward. For example, ensuring the option to finance green vehicles, and offering other low-carbon solutions, will help strengthen investment and modernise the industry.