Asset finance will
remain an important tool for corporates during this period of
redress and rebalance, says Alex Brown from Barclays
To many, the deterioration of
the economic climate over the past few months would appear to be
eerily similar to what happened in the run up to the financial
crisis in 2008.
Equity markets have sold off
and volatility has spiked but, the difference this time is that
businesses, alongside investors, are behaving very cautiously with
high levels of liquid assets and low levels of risk.
Policymakers have also
demonstrated that they are likely to do whatever it takes to avoid
another economic meltdown.
The perception is that there
will be further deterioration in conditions at first but I am
confident British corporates will be able to respond to the
challenges and opportunities which arise as they did during the
David Cameron’s rallying cry
at the Conservative Party conference was for Britain to “show the
world some fight” and create a “country that’s back on its feet and
For me, British business’
ability to survive and adapt was one of the striking
characteristics to emerge from the last economic crisis. That’s not
to say there weren’t casualties along the way but those smart
management teams which worked hard to ensure they had robust
business models and one eye on the future came through in a
As a bank, we saw our clients
deleverage, reduce their levels of debt, improve working capital
and hold cash reserves.
Since then management teams
have strived to adapt to the stagnant economic environment and have
accepted that little or no growth is the new normal and that this
is likely to be the prevailing economic climate for some time
Some businesses continue to
postpone capital investments, but this cannot continue
indefinitely. The environment calls for caution but not full
abandonment of investment strategies and we expect to see an
increase in borrowing to finance this and also take advantage of
the strategic growth opportunities which have begun to
Undoubtedly there will be
challenges but leadership teams must stay positive.
I am confident that asset
finance will remain an important tool for corporates, as an
alternative to conventional bank debt, during this period of
redress and rebalance.
The most recent figures from
the FLA show that, in the second quarter of 2011, asset finance
providers lent in excess of £80m (€92m) every single day to
businesses, allowing them to invest and upgrade vital
For those larger corporates
whose ambitions will stretch outside of the UK and take in
opportunities in emerging markets, asset finance will continue to
provide much needed support and help British business show the
world some fight.
Alex Brown is global head
of asset finance at Barclays Corporate