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Brokers overcome uncertain economy to guide UK asset finance market towards record levels

Asset finance new business (primarily leasing and hire purchase) grew by 9% in October, compared with the same month last year, pushing the market closer to an all-time record, according to new analysis.

Latest figures from the Finance & Leasing Association (FLA) show that the plant and machinery finance and business equipment finance sectors had particularly strong new business growth, rising 16% and 29% respectively, compared with October 2017.

New finance for commercial vehicles increased by 23% over the same period.

For the 12 months to the end of October, asset finance demand has grown 9% compared to the previous 12 month period, or 3% excluding high-value items.

Growth has come almost entirely from broker-introduced finance, which was up 22% in October compared to the same period last year and 12% over the past 12 months.

Geraldine Kilkelly, head of research and chief economist at the FLA, said: “The asset finance market made a strong start to the final quarter of 2018, with new finance for construction and agricultural equipment up in October by 27% and 19% respectively, compared with the same month in 2017.

“Asset finance new business in 2018 as a whole is likely to reach a record level, despite continued economic uncertainty weighing on business investment.”

Source: Asset Finance International

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UK invoice finance and asset-based lending grows despite economic uncertainty

The UK’s invoice finance and asset-based lending industry achieved modest growth, despite business uncertainty over the economy, new figures from UK Finance show.

The association’s invoice finance and asset-based lending update shows that advances stood at £22.6 billion at the end of Q3 2018, a rise of 2.4% compared to the same period last year.

Invoice finance accounted for 80% of lending by value, with most clients requiring factoring or invoice discounting.

The number of businesses using invoice finance and asset-based lending remained stable at around 40,400, of which 1,641 companies used asset-based lending in the quarter.

Overall, most clients were in the service, manufacturing or distribution sectors, with an average advance value of around £560,000.

For large businesses with a turnover of more than £100 million, support stood at £7.4 billion, with an average advance value of £17.2 million.

While there was growth overall, demand among small businesses with a turnover of less than £1 million fell.

The amount of finance provided to companies with turnover between £500,000 to £1 million was down 15% year-on-year to £436 million. Demand among companies with a turnover of less than £500,000 fell 5% to £664 million over the same period.

Stephen Pegge, managing director, commercial at UK Finance said: “Asset-based lending continues to show steady growth, driven mainly by advances to larger businesses.

“Support to small and medium-sized companies through invoice finance and asset-based lending is now comparable to total balances drawn on overdrafts.

“However, overall growth has remained modest in line with recent trends across SME lending, as businesses delay investment decisions until the broader economic picture becomes more certain.”

UK Finance is the collective voice for the banking and finance industry, representing more than 250 companies across the industry.

UK invoice finance and asset-based lending

Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018
Total advances (end quarter balances, all products) £m  22,039 22,135 21,633 21,408 22,567
Annual year-on-year growth 13% 5% 4% -2% 2%
Invoice finance – advances against debt £m 17,384 18,031 17,344 17,052 17,905
Invoice finance plus – advances against debt plus other assets £m 28 29 29 31 30
Total asset based lending £m 4.158 4.059 4.246 4.303 4,607
Against debt £m 2,860 2,693 2,822 2,850 3,127
Against stock £m 733 759 893 867 867
Against plant and machinery £m 391 450 378 426 442
Against property £m 96 85 86 94 102
Against other assets £m 78 72 67 66 69
Other commitment £m 19 16 14 22 25

Source: UK Finance