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According to the latest Asset Based Finance Association (ABFA) Economic Report, the asset based finance industry is continuing to assist UK businesses as they begin to make their way out of the recession.
In the UK, the asset based finance industry advanced £14.3 billion at the end of June 2009, against invoices, stock, property and other trading assets worth £27.3 billion. While there has been a slight fall in advances, this reflects the movement of the wider economy where all parts are still contracting.
However, as the report finds, the rate of contraction has been smaller in the last quarter due to improving business confidence and the increase in production to meet demand, which is falling less sharply. The degree of improvement remains patchy across different industries with construction, manufacturing of all types, haulage, distribution and hospitality industries seeing little increase in demand and the professional services and print industries experiencing a marked upturn.
Kate Sharp, chief executive of the ABFA, said: "These latest figures show that the asset based finance industry, and the wider economy as a whole, are still suffering the impact of the recession. While business confidence and positive elements can be drawn from the Economic Report, improvement is still very much localised, and at the moment is restricted to certain industries."
The economist behind the report, Paul Mizen from Nottingham University, also notes that smaller firms with a turnover of less than £10 million have experienced a greater decline in advances compared to medium and large firms who have a turnover above £10 million.
Kate continues: "SME's are still finding it difficult to secure funding. This reinforces the Bank of England 'Trends in Lending' findings, which argues that there has been an improvement in lending conditions for larger companies, partly because access to finance from capital markets has eased, but also because banks are showing greater willingness to lend."
It would seem that this lack of liquidity is continuing to place pressure on companies, with the numbers of credit protection payments being made to ABFA members' clients rising by 47 per cent to £21.2 million in the year to June 2009 compared to £14.4 million at the end of June 2008. These are the payments that are made by the ABF industry to their clients when their customers default on debt receivables.
"While the last 18 months have been difficult for SME's, they should be encouraged that the figures suggest that the UK and Irish economies have both experienced the worst of the recession and can now start planning for the upturn.
"Over the next few months, firms will need to look at amending their business
strategy to capitalise on any opportunities that may arise. This is where asset
based finance is perfectly placed to assist, it is a robust and reactive option
that is ideally placed to support growing businesses in the current climate."
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