Asset Finance Remains Popular
The latest figures from the FLA tell a positive story about the asset finance market’s robustness during 2018.
Despite widespread market fluctuations (not helped by Brexit), with the exception of motor finance, the amount of asset finance provided to UK businesses, across all the other sectors the FLA monitors, showed month on month and year on year growth when compared to 2017. In 2018, the overall value of new business finance through FLA members was £136.8 billion, up 7% on 2017.
|Type of Finance||Year on Year % Growth|
|Plant and machinery finance||5|
|IT equipment finance||15|
|Business equipment finance||4|
|Commercial vehicle finance||7|
|Business car finance||-8|
The motor finance market decreased significantly because of vehicle supply issues brought about by the changing emission testing regulations facing the motor industry. There was a causal link between the reduction in registrations in the fleet market and the finance provision associated with the registrations.
Whilst last year’s asset finance growth is good news, there is little doubt that the political uncertainties surrounding Brexit are ruffling feathers now. The challenges that the Prime Minister has faced in getting her exit deal through Parliament, combined with the fear of a no deal Brexit are affecting business confidence in 2019.
The British Business Bank has reported that borrowing has become harder to obtain and that investment is being put off, or that cash is being hoarded by the UK’s smaller companies as they prepare to face Brexit. If anything, the environment is expected to get tougher, at least in the short term.
For those businesses that have a good credit standing, asset finance offers a very practical way of funding assets that doesn’t exhaust capital or expose companies to the risks associated with depreciation or disposal losses.
There is risk in borrowing but, arguably, there is as much risk in standing still, particularly if the competitors a business faces make decisions to invest in the latest equipment and processes. Companies that invest in uncertain times have been proved to gain a competitive edge when normalised trading conditions return.
However Brexit pans out, it won’t stop trade because that’s still essential for everyone, so keeping calm and carrying on with planned investments is sensible for those companies that can afford to hold their nerve.
And there is some good news for those that are ready to invest. The government, keen to encourage that investment, recently introduced the most generous Annual Investment Allowance increase ever – the new £1 million allowance limit came into force In January 2019 and will run through 2020. Importantly, for businesses unwilling or unable to commit large amounts of capital cash, the same allowances are also available on items financed through Hire Purchase and Contract Purchase arrangements.
So, whilst there is uncertainty, there is also the argument that there has never been a better time than now, at least from a tax relief perspective, to invest in new assets.
If you’d like to discuss your asset finance options, send us a message or give us a call on 0845 643 1319.