What is the outlook for 2010? Is the industry now poised for a return to growth or facing a period of stagnation or even further decline? After 2009 even stagnation would seem like good news, a quick review of national leasing associations highlights some dramatic falls in new business volumes during the year. For example, in France ASF reported that equipment finance is 25% down year-on-year in Q3, with similar falls in Germany reported by BDL. In Italy ASSILEA is forecasting finance volumes down 23% for the year while in the UK, data just published by the FLA shows that business finance was down 33% year-on-year in October. The year looks like ending even worse in Eastern Europe with leasing down over 50% in the Czech Republic and over 70% in Romania.
Despite the bad news this year it appears that the industry feels more confident about 2010. In the recent European Asset Finance Business Confidence survey published by Invigors and Leasing Life, respondents expressed a more optimistic view of the next six months, particularly when compared to the previous survey undertaken in April. Last month nearly two-thirds expected new business volumes to increase over the next six months, up from 45% in April.
The most recent survey also suggests that lessors are gaining better control over bad debt. Only 35% of respondents expected bad debt to increase in the next six months, down from a high of 77% in April. 25% anticipated bad debt will fall while the remainder expected no change. A combination of rising new business volumes and improving bad debt is feeding through into expectations of increased profits. Half of those surveyed in November believe that their organisation's profits will increase over the next six months, up from 40% in April.
Although business volumes are expected to grow in 2010, it appears that the improvement in margins, identified in previous surveys, has reached a plateau for many. Only 27% of respondents expected margins to improve over the next six months, just half the same proportion in April. 48% predicted margins to remain the same, double the number in April.
With business volumes, bad debt and profits moving in the right direction, more financiers are now targeting growth. Two thirds of respondents stated that their companies were specifically seeking growth, an increase from just 40% in April. The market sectors targeted varied considerably, though healthcare and green assets such as waste management and renewable energy appear to be popular.
It is apparent from the comments made that some funders have weathered the recession much better than others and are now poised for growth. These businesses plan to achieve growth at the expense of the competition whether the overall market for asset finance recovers, or remains at its current low level. It is clear that agile and well-funded businesses are best placed to respond to the rapidly changing economic and competitive environment while their less adaptable competitors will continue to shrink their business and withdraw from sectors of the market from necessity rather than choice.
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