The importance of asset based finance to the UK economy
by Kate Sharp, Chief Executive of the Asset Based Finance Association
The International Monetary Fund has this month upgraded its economic forecast for Britain, despite downgrading its forecast for global growth. The IMF now predicts UK growth of 1.4 per cent in 2013, up from 0.9per cent and by next year predicts the economy to grow by 1.9per cent.
Businesses are feeling more confident in taking on debt and as firms need access to finance to grow and succeed so the asset based finance sector is playing an ever more critical role in the UK’s recovery. The industry, along with the rest of the economy, suffered a downturn in 2009, with client turnover falling to £190 billion, down 9 per cent from the 2008 figure. However, since then it has continued to enjoy strong growth, with client turnover breaking £210 billion in 2010, £240 billion in 2011 and more than £250 billion in 2012.
The ABFA’s latest figures (for the end of Q2 2013) show a 10 per cent increase in funds out from ABFA Members to businesses with £17.4 billion out to clients at the end of June, up from £15.8 billion in 2012. This is the highest balance of advances since September 2008 and only the third time this has topped £17 billion. The figures also paint a convincing picture of rising export demand, with export factoring and export invoice discounting seeing growth of 28 per cent and 13 per cent respectively. This indicates that as both the EU and America, the UK’s two largest trading partners, continue their own recovery, companies are taking advantage of this and working hard to raise sales through exports. Both small and large companies are enjoying the rising confidence, with advances to small firms (£500,000 – 1 million t/o) recording 6.2 per cent growth in the last quarter alone, whilst larger companies (£50 million - £100 million t/o) have similarly seen growth in advances of some 14.3 per cent.
In terms of sectoral analysis, the ABFA’s data indicates that asset based finance is being used extensively to support manufacturing, supporting over 12,600 manufacturing businesses. The figures show the distribution, services, transport and construction sectors also drawing significantly on asset based finance products. Overall the figures indicate rising confidence and demand from companies using asset based finance, with businesses willing and able to take advantage of the opportunities that are presented as the economy continues its recovery. It also highlights the increasingly important role for asset based finance within the UK economy, as wider net lending fell by 3.5 per cent in the12 months to June 2013, marking the biggest fall in net lending since June 2012. With the sector performing strongly, client numbers are predicted to rise to 45,000 by the end of 2013.
Put simply, for companies looking to grow and trade successfully, asset based finance is one of the most popular and effective forms of finance available and is playing an increasingly pivotal role in the UK’s economy.