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Equipment Leasing Market Report 2003


Description: Expenditure on equipment leasing in the UK increased by an estimated 4.9% in 2002, to £27.44bn. Since 1998, the market has grown in value by 13.3%. Over the same period, total gross domestic fixed capital formation (Gdfcf) increased by an estimated 10.6% and business investment by an estimated 10.1%. Despite the many advantages that leasing offers to the wide range of industries and institutions that make use of this service, growth rates could be improved by more positive tax benefits for lessees, which would make leasing more attractive to potential customers. In recent years, the Inland Revenue has reduced the tax benefits to lessors and lessees, and this has depressed the value of business obtained. Most UK lessors are subsidiaries of domestic and foreign banks, but also operating in the leasing market are the financial subsidiaries of large manufacturers, e.g. General Electric Co. (US), which are funded by the parent companies, and the financial subsidiaries of motor manufacturers that are dedicated to providing finance for fleet buyers of their cars and trucks. In addition, there are independent operators, which obtain their funds from the money markets. These organisations both arrange and provide the finance for small-ticket, middle-ticket and big-ticket transactions, which range from computers to ships, aircraft and railway rolling stock. Manufacturing investment has been the poorest-performing sector in the leasing market, reflecting the growing trend among companies in the textile, engineering, chemical and other industries to close factories and plants in the UK and/or relocate their businesses in other countries, such as China. The number of big-ticket deals in the UK is declining, and lessors that were once content to operate mainly in the UK market are now keen to cross borders and arrange international deals, despite the potential extra risks to their investments. Asset finance in the service sector has been fairly buoyant because of the strength of consumer expenditure, but there is now doubt that the high rate of expenditure can be maintained at its current level. Prospects for leasing companies are directly linked to their clients' own business expectations and how these affect their need to make short-, medium- and long-term investments in new equipment. Lessors have become more cautious about acquiring long-term assets - which tie up large amounts of capital - and leasing them to companies in businesses that have proved to be vulnerable to recession or politics, e.g. ships, aircraft and trains. Leasing to central government and local authorities tends to carry the fewest risks for lessors and these customers are making greater use of leasing for the modernisation of their services and as part of their commitment to private finance initiatives (PFIs) and public/private partnerships (PPPs). Our forecasts for the leasing industry take into account the high value of such schemes, which are expected to sustain expenditure on equipment. At the same time, expenditure on more conventional developments is forecast to grow more slowly, in parallel with slow growth in gross domestic product (GDP). Between 2003 and 2007, the total value of asset finance is forecast to rise by 15.7%.


Contents: TABLE OF CONTENTS:

Executive Summary 1

1. Market Definition 7

REPORT COVERAGE 7
DEFINITION OF A LEASE 7
MARKET SECTORS 8
Types of Lease 8
Finance Leases 8
Operating Leases 8
Contract Hire 9
Hire Purchase 9
MARKET TRENDS 9
MARKET POSITION 10
The UK 10
The National Economy 10
Table 1: Gross Domestic Product at Current and Constant 1995 Prices (£m), 1998-2002 10
Total Investment in Fixed Assets 11
Table 2: Gross Domestic Fixed Capital Formation at Current and Constant 1995 Prices (£m), 1998-2002 11
Business Investment 12
Table 3: Investment in Machinery and Equipment at Current Prices (£m and %), 1998-2002 12
Business Investment and Gross Domestic Fixed Capital Formation 13
Table 4: Business Investment at Current Prices (£m and %), 1998-2002 13
Overseas 14

2. Market Size 15

THE TOTAL MARKET 15
Table 5: Estimated Market Size for Asset Finance in the UK by Value at Current Prices (£m), 1998-2002 15
Business and Lease Investment 16
Table 6: Gross Domestic Fixed Capital Formation, Business Investment and Total Asset Finance by Value at Current Prices (£m and %), 1998-2002 16
MARKET SECTORS 17
By Type of Asset 17
Table 7: The Value of New Business in Assets Financed by FLA Members by Sector (£m), 1997-2001 17
Cars 18
Equipment 19
Plant and Machinery 19
Commercial Vehicles 19
Aircraft, Ships and Rolling Stock 20
Property 20
Other 20
International Assets 20
By Industry Sector 20
Table 8: The Value of New Business in Assets Financed by FLA Members by Industry Sector (£m), 1997-2001 21

3. Industry Background 22

HISTORICAL BACKGROUND 22
The Leasing Industry 22
Finance & Leasing Association Members 22
NUMBER OF COMPANIES 23
Table 9: Number of UK VAT-Based Enterprises Engaged in Financial Leasing by Turnover Sizeband (£000), 2002 23
REGIONAL VARIATIONS IN THE MARKETPLACE 24
DISTRIBUTION 24
HOW ROBUST IS THE MARKET? 24
LEGISLATION 25
Accounting Standards 25
Tax Legislation 25
KEY TRADE ASSOCIATIONS 25
British Vehicle Rental and Leasing Association Ltd 25
Finance & Leasing Association 26
Leaseurope 26

4. Competitor Analysis 27

THE MARKETPLACE 27
MARKET LEADERS 28
Abbey National Treasury Services PLC 28
Company Structure 28
Current and Future Developments 28
Financial Results 28
Bank of Scotland Structured Asset Finance Ltd 28
Company Structure 28
Current and Future Developments 28
Financial Results 29
Barclays Asset Finance 29
Company Structure 29
Current and Future Developments 29
Financial Results 29
DaimlerChrysler Services UK Ltd 29
Company Structure 29
Current and Future Developments 29
Financial Results 30
FCE Bank PLC 30
Company Structure 30
Current and Future Developments 30
Financial Results 30
Five Arrows Leasing Group Ltd 30
Company Structure 30
Current and Future Developments 30
Financial Results 31
GE Capital Equipment Finance Ltd 31
Company Structure 31
Current and Future Developments 31
Financial Results 31
HSBC Equipment Finance (UK) Ltd 31
Company Structure 31
Current and Future Developments 31
Financial Results 32
Key Equipment Finance Ltd 32
Company Structure 32
Current and Future Developments 32
Financial Results 32
Lloyds TSB Asset Finance Division Ltd 32
Company Structure 32
Current and Future Developments 32
Financial Results 32
Lombard North Central PLC 33
Company Structure 33
Current and Future Developments 33
Financial Results 33
Rolling-Stock Leasing Companies 33
Angel Trains Ltd 34
Porterbrook Leasing Company Ltd 34
Other Companies 34
ADVERTISING AND PROMOTION 35

5. Strengths, Weaknesses, Opportunities and Threats 36

STRENGTHS 36
WEAKNESSES 36
OPPORTUNITIES 36
THREATS 37

6. Buying Behaviour 38

UK LEASING 38
Types of Lease 38
Finance Leasing 38
Operating Leasing 38
Contract Hire 38
Hire Purchase 38
Business Investment 39
Manufacturing 39
Consumer Expenditure 39
Public Sector 39
Construction 39
Wholesale and Retail 40
EUROPEAN LEASING 40
Leading European Leasing Countries 40
Machinery and Industrial Equipment 40
Table 10: New Leasing Business in Machinery and Industrial Equipment by Country by Value (*m), 1999-2001 41
Computers and Business Machines 41
Table 11: New Leasing Business in Computers and Business Machines by Country by Value (*m), 1999-2001 41
Road Transport Vehicles 42
Table 12: New Leasing Business in Road Transport Vehicles by Country by Value (*m), 1999-2001 42
Cars 42
Table 13: New Leasing Business in Cars by Country by Value (*m), 1999-2001 43
Ships, Aircraft and Rolling Stock 43
Table 14: New Leasing Business in Ships, Aircraft and Rolling Stock by Country by Value (*m), 1999-2001 43

7. Current Issues 45

ECONOMIC GROWTH 45
ACCOUNTING STANDARDS 45
ONLINE TRADING 46
ASSET MANAGEMENT 46
EUROPEAN LEASING 47
IMPACT OF THE EURO 48

8. The Global Market 49

THE TOTAL MARKET 49
Table 15: The World Leasing Market by Region ($bn), 1997-2001 49
THE WORLD ECONOMY 50
EUROPE 50
Table 16: Value of New Equipment Leasing in Europe (*bn), 1997-2001 51

9. Forecasts 52

THE ECONOMY 52
FORECASTS 2003 TO 2007 52
Table 17: Forecast Gross Domestic Fixed Capital Formation, Business Investment and Total Assets Finance by Value at Constant 2002 Prices (£m), 2003-2007 53
FUTURE TRENDS 53
Plant and Machinery 53
Computers and Office Equipment 54
Cars and Trucks 54
Buses and Coaches 54
Trains 54
Ships 55
Aircraft 55

10. Company Profiles 56

Abbey National TReasury Services Plc 57
Angel TRains Ltd 59
Daimlerchrysler Services Uk Ltd 61
Fce Bank Plc 63
Ge Capital Equipment Finance Ltd 65
Lombard North Central PLC 67
Porterbrook Leasing Company Ltd 69
Bank Of Scotland Structured Asset Finance Limited 71
Five Arrows Leasing Group Limited 73
Key Equipment Finance Limited 75
Lloyds Tsb Asset Finance Division Limited 77
Hsbc Equipment Finance (uk) Limited 79
Hsbc Asset Finance (uk) Limited 81

11. Further Sources 83

Associations 83
Publications 83
Directories 84
Bonnier Information Sources 84
Government Publications 85




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