Peter Hunt analyses
market statistics for the year to 31 January 2009
This year cannot have started well
for many business finance providers, with FLA new business volumes
for business finance (excluding big ticket) down some £700 million
(€751 million) on 2008, a heavier year-on-year percentage fall than
in any of the preceding months.
Motor and consumer finance also
fell heavily on a year-on-year basis, though big ticket continues
to offer some positive news, rising 15 percent on 2008 and 3
percent on the month.
January was a weak month for
business car finance, down 48 percent on last year. Registrations
entering the fleet and business markets slumped 35 percent. While
this would suggest a lowering market penetration, it may only be a
timing issue with finance levels dropping less than registrations
Not surprisingly, over the past
four months these two data points have followed a consistent,
Similarly commercial vehicle
finance was down 31 percent in February, with registrations showing
a larger fall for the month (trucks down 32 percent while vans were
down 47 percent). In February commercial vehicle registrations
showed an even bigger fall, with trucks down 42 percent and vans 58
percent down on 2008 figures.
Business equipment finance has
also fared badly over recent months, with IT and plant and
machinery proving to be the most
resilient financing markets, in volume terms at least.
In terms of routes to market,
early declines in sales finance now appear to being matched by more
rapid, recent declines in direct and broker business. That said,
the financial stature of brokers is likely to be weaker than
bank-owned players operating in other areas of the market and may
therefore present the greatest turbulence in coming months.
January saw full payout leasing
making up only 12 percent of new business volumes (including big
ticket finance). Its use over the past year has been more variable
than other product types, and not correlated to either quarter end
or big ticket volumes. Lease/hire purchase has shown a consistent
drop over recent months.
Not surprisingly, when compared to
December last year, January saw a small but notable increase in
arrears reported by FLA members.
For the second time in the last 12
months, ‘other finance’ was larger than either residual risk
leasing or lease/hire purchase, representing 31 percent of business
finance volumes. Its growth may justify more detailed analysis.
Though its volatility
suggests a bias towards large-ticket activity, this may mask areas
of innovation and growth in smaller ticket financing activity.
An age-old concern of FLA
statistics has been the risk of double counting when wholesale
finance is provided by one member to another.
Whether some of this appears in ‘other finance’
or not, it is an area for consideration.
The author is a partner in the consulting and
services firm Invigors and can be contacted at firstname.lastname@example.org