The Finance and Leasing Association (FLA), the
Road Haulage Association (RHA), the Society of Motor Manufacturers
and Traders (SMMT) and other motoring organisations have all
announced their satisfaction with Chancellor
George Osborne’s mini-budget, although no measure announced
directly affects car finance.
While some proposals such as the reduction in
fuel duty increases and additional investment in transport
infrastructure may drive consumer appetite for motoring, others may
affect the money available to counterparty companies to car finance
providers.
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The government’s pledge to underwrite bank
loans to small businesses, known as credit easing, the Business
Finance Partnership and a review of the R&D tax credit system
could affect the cost of borrowing money, investment and the price
of products available to repair shops, outsourcers, delivery firms
and even dealerships.
SMMT chief executive Paul Everitt singled out
the review of the R&D tax credit system, for which the SMMT and
the EEF had campaigned. The UK motor industry invests more than
£1.3 bn in R&D each year, the SMMT claims.
The RHA had previously dismissed credit easing
and, prior to the mini-budget, called for the government to put
more pressure on leading firms to make prompt payment to their
suppliers, many of whom are customers or business associates of the
motor finance industry. Following the chancellor’s statement,
however, the Association said it welcomed the cancellation of the
planned fuel duty increase in January 2012 and reduction of the
planned increase in August.
Like the RHA, the Institute of Advanced
Motorists and Freight Transport Association, were also supported
new plans to inject money into transport infrastructure, pointing
out that investment in road maintenance could reduce congestion,
carbon emissions and the number of crashes.
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By GlobalDataThe FLA said it was “pleased” with the autumn
statement and announced the Business Finance Partnership scheme run
with the government to make additional investment finance available
using asset finance delivery channels.
With the government’s pledge to underwrite
bank loans to small businesses – known as credit easing – and the
availability of £1bn to companies working with, or including,
dealers, brokers, repair shops, outsourcers and creditors, the FLA
are hopeful the sector will have increased access to funds at a
time of a reduced cost in borrowing.
Considering the existing availability of asset
finance funding in the UK, Stephen Sklaroff, director general of
the FLA, said measures in the autumn statement “will cover
alternative sources of finance for small- and medium-sized
businesses, including those of non-banks.”
Total car finance business written by FLA
members stood at £1,730m for September 2011, up 8.6% on September
2010. The Q3 total was £3,668m and £13,302m for the year to
September, up 7.1% and 2%, respectively, on the same periods of the
previous year.
Last week, addressing the FLA 8th
Annual Motor Finance Convention, Sklaroff said that the motor
finance market was doing “much better than surviving” despite the
decline in the availability of credit, with the new car market
having grown 9%, and the used car market 6%, from September 2010 to
September 2011.
Also speaking at the convention, Ruth Lea,
economic advisor, Arbuthnot Banking Group, warned that further
credit reduction in other sectors of the economy would affect
investment and growth.
Proven correct by the autumn statement in her
prediction that growth in 2011 would be “less than 1%”, Lea said
the housing market was expected to shrink by 1%, therefore
shrinking GDP and spending.
“Investment,” said Lea, “tends to follow
growth. Companies invest when they see demand for their products
improving.”
Further coverage of the 8th
Annual Motor Finance Convention will appear in
December’s issue of
Motor Finance
magazine.
richard.brown@vrlfinancialnews.com
