The list of names is like a roll call, telling us all we need to
know about the story so far: Alliance and Leicester, HBOS, Lehman
Brothers, AIG, Merrill Lynch, Fortis, Bradford and Bingley. Things
are not going well, and it is quite clear that this shake-out has
some way to go. Things won’t be helped by the US House of
Representatives’ rejection of the President’s $700bn bailout
The crisis has already had a marked effect on the UK contract
hire companies. Liquidity and profitability are under
attack. It is about to affect the shape of the market too:
The mooted takeover of HBOS by Lloyds TSB will bring together the
two largest UK contract hire companies, Lex Vehicle Leasing and
Lloyds TSB Autolease. In other times such a move would have led to
monopolies commission referral but this won’t happen as the
government has already announced that the overall bank merger is in
the national interest.
So we are about to see the creation of the UK’s largest contract
hire business, with a fleet of around 380,000 vehicles. This is
more than three times the size of nearest rivals LeasePlan and
Lombard. Only 15 years ago a fleet of 50,000 was considered huge. I
have heard much speculation about the future of the new business,
but it’s not worthwhile repeating here as it’s likely that no-one
has yet worked out the plans; in fact, Jon Walden of Lex and Nigel
Stead of LTSBA have already said as much.
There are about 1.5m vehicles on contract hire in the UK. The
new business will have about 25 per cent of the market. Which
raises the question; would this be a bad thing?
Size and share
A quick comparison with the US fleet leasing market might be
useful here. Their market has undergone massive consolidation and
there are very few players left. The top 10 fleet lessors fund the
vast majority of the nation’s 1.8m fleet vehicles. With 512,000
funded vehicles, GE has 40 per cent of the US market. PHH has
375,000, 18 per cent of the market.
The top five players have 85 per cent of the US market. In the
UK the top five have 47 per cent of the market, which will rise to
52 per cent after the Lex/LTSBA merger.
I suppose that at heart I’m one of those people who loves the
countryside but would never live there, and loves the idea of small
local shops, but does his weekly shopping in Tesco because of the
choice, prices and convenience. So, much as I may like the fact
that UK fleet managers have 50 capable contract hire companies to
choose from, the fact is that these are tough times for the UK
contract hire industry and change is inevitable.
Also, some recent developments (new services and systems, better
quality management) have only come about because of the scale of
some of our contract hire companies. Having one huge player is
going to be a new experience for this market. It is going to be
fascinating to see what happens next.
Professor Colin Tourick, fleet management consultant