The asset finance industry in the UK experienced a substantial surge in April 2024, with new business growing by 31% compared to April 2023, according to the latest data from the Finance & Leasing Association (FLA). This growth underscores a robust start to the year, with overall new business in the first four months rising by 7% compared to the same period in 2023.
Sector-Specific Growth
The increase in asset finance new business was particularly pronounced in specific sectors. The business new car finance and commercial vehicle finance sectors saw impressive increases of 35% and 45%, respectively. This indicates a strong recovery and expanding investment in these areas, which are critical to the broader economic infrastructure.
The plant and machinery finance sector also saw a rise, albeit at a more modest rate of 9%. Meanwhile, business equipment finance grew by 4%, demonstrating steady demand in these foundational sectors.
Contributing Factors and Economic Implications
Geraldine Kilkelly, Director of Research and Chief Economist at the FLA, attributed part of the spike in April’s figures to the shorter working month in April 2023 due to the timing of Easter, which may have distorted year-on-year comparisons. However, she emphasized the significant role of vehicle finance sectors, which have been major drivers of growth in 2024, contributing a 15% increase in new business over the first four months.
By contrast, machinery and equipment finance sectors have not fared as well, reporting a 9% decrease in new business over the same period, reflecting variances within the broader asset finance market.
Long-Term Economic Growth and Asset Finance
“The asset finance industry is pivotal in funding UK investment in machinery, equipment, and vehicles, contributing to as much as 40% of such investments,” noted Kilkelly. She highlighted the critical role of asset finance in supporting business growth and enhancing productivity across industries. This sector’s robust performance is especially significant as it plays a vital role in facilitating businesses to achieve sustainable growth.
Detailed Financial Data
In terms of detailed financial data, commercial vehicle finance showed remarkable growth, along with strong performances in IT equipment finance and aircraft, ships, and rolling stock finance, which saw an 82% increase in April. This diversified growth across various asset classes underlines the sector’s resilience and adaptability in meeting the dynamic needs of the business landscape.
The channel data reveals that direct finance and broker-introduced finance both experienced growth, with direct finance seeing a 32% increase, indicating a strong preference for direct lending solutions among businesses.
Market Dynamics and Outlook
As the UK gears up for an election, the asset finance sector remains a critical barometer of economic health and business sentiment. With its significant contribution to business investment, the performance of this sector is likely to influence and be influenced by future government policies aimed at stimulating economic growth.
The continued expansion of the asset finance market not only reflects the current economic recovery trajectory but also underscores the sector’s potential to facilitate broader economic stability and growth. Businesses and policymakers alike will be watching these trends closely, as they could significantly impact decision-making and strategic investments in the coming months.
