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– Industry value over £190 billion for the first time
– Total funds advanced to UK businesses up by 16%
The asset based finance industry has bucked the financial markets downturn and reported record growth for 2007. End of year results from the Asset Based Finance Association (ABFA) show the industry is now worth more than £191 billion.
Growth in total client sales is at 12% which means the industry has more than doubled its size since December 2000. ABFA members advanced £15.7 billion to over 48,000 UK companies last year, an increase of 16% on 2006 figures.
This extraordinary growth has been driven by large PLCs turning to invoice finance and asset based lending to fund MBOs, acquisitions or significant expansion. In the last year alone the number of clients turning over £1 billion or more has increased by approximately 65% whilst their advances grew by 38%.
The increased prevalence of asset based finance can also be seen in the number of syndicated deals lead by ABFA members. At the end of December 2007, ABFA members were the lead financiers on deals worth £1.2 billion compared to £918 million at the same time last year.
In recent times the sector has also seen a growing number of companies seeking to leverage the working capital tied up in stock. The number of clients using stock finance increased by 49% in 2007 and, whilst outstanding debtors is still the predominant asset, stock security values increased by 48%.
Kate Sharp, Chief Executive of the ABFA, said: "Despite limited liquidity elsewhere in the debt markets, the asset based finance industry has proven its resilience and shown that it can continue to grow in tough economic conditions.
More importantly, our members have proven to be a lifeline to UK companies who have experienced tightened lending conditions and needed alternative sources of funding to sustain growth."
Interestingly, the changes in the sector demand for asset based finance mirrors current productivity issues. The retail and services sector – perhaps the hardest hit by the credit crunch aside from financial institutions – has seen a drop in the number of clients using asset based finance.
"I’m not surprised that we’ve seen a small decline in the number companies in the retail and services sector, as it is well known that these sectors have scaled back expansion plans. However, it’s not yet a cause for concern as together they still account for nearly a third of our client base. Plus the drop is more than compensated for by the uplift in the number of construction and distribution clients on our members’ books," Sharp comments.
Tough market conditions and the Sterling’s fall against the Euro could also be behind the growth in export invoice discounting. The use of export invoice discounting has jumped by 41% indicating that more businesses are trading overseas, perhaps in an effort to dodge the slowdown in the UK.
The other key trends revealed
by 2007 figures, compared to December 2006, include:
– Domestic factoring
grew by 6% and domestic invoice discounting increased by 12%
– ABFA members
advanced £15 billion against debt, equating to a 15% growth
– The number
of clients using stock finance, including ABL, grew by 39%
Given that the average growth rate of asset based finance in the US over the past 10 years has been 12 per cent, if the UK followed the same pattern the market would be looking at advances in excess of £40 billion by 2016.
To view the full report on the statistics for quarter four 2007 please click here