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Leasing Professionals The lessors’ champion: A profile of the FLA’s Stephen Sklaroff Published: 3rd October 2019 Share On 5 September 2019 the UK Business Secretary Andrea Leadsom met senior representatives of Britain’s leading banks and other lenders to set out support for SMEs ahead of Brexit on 31 October. She announced the launch of a new Business Finance Council with the aim of identifying and addressing any barriers faced by small and mid-sized businesses in securing the finance they need – particularly working capital and finance for investment. The FLA has also been invited the join the Council – and there is no doubt that such recognition by the government of the crucial importance of asset lending at such a challenging time would have been absent from its thinking 12 years ago. In 2007 the customary government opinion was that leasing was little more than a tax dodge and that lessors were unreliable marginal players with opportunistic mind-sets. Much of the transformation in opinion by government towards asset lenders is the result of the persistent lobbying by the UK Finance & Leasing Association – and most especially Stephen Sklaroff whose 12-year tenure as director general comes to a close this autumn. He told Asset Finance International: “It has now been many years since anybody asked me if asset finance wasn’t more than tax management. That is a major change – as we now have a buy-in from politicians way beyond what it was when I first joined. They now understand how important this market is for the economy. “A good example of that is the setting up of the new Business Finance Council to look specifically at what we’ve been banging on about for ages, which is how to get more finance to SMEs. Furthermore, they have personally written to us to ask us to join the Council because they recognise the real importance of asset finance in that mix.” A baptism of fire That is certainly a letter Sklaroff would not have expected when he joined the FLA. In fact he assumed his seat at Imperial House with something of a baptism of fire heralded by the collapse of the old order with the onset of the Great Recession. Perhaps his previous career inured him to life’s challenges. After all he was the duty officer at the British embassy in Washington when Iraqi tanks rolled into Kuwait in August 1990 to spark the first Gulf war. This followed a distinguished academic record at Edinburgh University where he took his first-class degree and a PhD from University College, London. He gained first experience in the world of policy making as a civil servant for ministers Peter Walker and then Cecil Parkinson, and on the privatisation of British Gas and later the electricity companies in the late 1980s. Prior to joining the FLA he was deputy director general of the Association of British Insurers. “When the recession hit,” he explained, “we were in as good a position as you can hope to be because we were already in the process of ensuring that our relationships with regulators and the government were as good as they could be. And then, of course, this became vital during the crisis. I remember going in for emergency meetings with the chancellor (of the Exchequer) and we were in a position to ensure that our membership had a voice at the table.” Was his previous experience at government level crucial at this time? “Well at the very least it was helpful,” he stressed. “Because I had some insight into how the machine might be attempting to cope with the challenges presented by the crisis. I suppose that made the process of lobbying, and discussion with the government and regulators, easier than it would otherwise have been.” Unintended consequences Looking back, Sklaroff admits to his biggest consistent challenge being the process of helping the FLA membership adapt to the new regulatory regime. He said: “It has affected our markets in so many different ways. One of the things that one needs to do when dealing with regulators – and the government on regulatory change – is explain to them how, what may seem very sensible in one part of the market can have many unintended consequences in another. I think this has been the biggest challenge and I’m very grateful for all the help I’ve had from the members to help us meet that challenge.” During his tenure as director general, FLA membership, not withstanding amalgamations, has grown by 60% and now totals some 230 companies. Sklaroff attributes this to “the vast changes in the regulatory system over the last 10 to 12 years where more companies saw it made sense to be represented by a trade body that could talk on their behalf to the regulators, government and the media.” Also the FLA market as a whole has shown really good, steady growth over the last 12 years “so it’s an attractive market appealing to new people and bolstering our membership. The total market represented by FLA members across all our divisions grew in value (contracts) from £142 billion in the year I joined, to £198 billion last year. And that growth has been reflected across every single one of our markets.” So given these reasons it’s not surprising that FLA membership has grown. But what about its internal structure – did the traditional FLA structure of formal committees need amending in any way? He explained: “This is not an answer that will surprise anyone! But that system of committees, working groups, ad hoc discussion groups, and email lists, is in constant flux. There are some aspects that are more or less eternal because the problems/issues they represent are always with us. “For example there is a Legal Committee, and it is quite difficult to imagine a set of circumstances where you don’t need a Legal Committee. Having said that, over the 12 years many issues have both grown in importance, and diminished in importance, and what we’ve tended to do is create shorter-term structures to deal with those things. Perhaps one of the things that turned out to be less short term than we expected was the Regulatory Change Group when the regulations were coming in – we thought that might have a lifespan of a few years and it’s still going strong for fairly obvious reasons!” Relations with Leaseurope and Eurofinas Prior to Sklaroff heading the FLA, relations between the UK trade association and its mainland counterparts, Leaseurope and Eurofinas, had a history of being strained. The two federations are basically run by the same secretariat and Sklaroff stressed that “our interests in what they do is very similar to our members’ interests in what we do. In other words we are concerned that they should be representing our interests in the discussions that they have with the European Union (EU) authorities and others, and one of the things I’ve worked at in my time with the FLA is to ensure the communication at the top level of that organisation with me is as good as it can be. As you, probably know, they changed leadership in the recent past and it will be interesting to see how that evolves in the future.” (Relations are decidedly taking a turn for the better. This writer was, like others present, delighted to welcome the new Leaseurope director general, Anne Valette, joining those in London recently at Stephen Sklaroff’s retirement reception.) Looking ahead, Sklaroff identifies one of the challenges for the asset finance industry as being the move towards usership rather than ownership and the implications leading from that. He said: “One of the conversations that we are just beginning to have with the Financial Conduct Authority is that some of the finance models, as we go through the next 10 years, are probably going to require rather different approaches from the regulator than the dear old Consumer Credit Act envisages, and that we may need to do some collective thinking with our members and with the regulators and possibly future governments on that issue.” Brexit: provisions for deal or no deal And then there is Brexit. “What we have tried to do on behalf of our members is two things. Make sure that their concerns about possible Brexit outcomes are conveyed to the people that they need to be conveyed to such as regulators or government; and high on that list for all our members is the general issue of the possible impact on consumer settlement in the economy on the whole. “Alongside that, we’ve put a lot of effort into communicating to our members what the government and regulators are saying – the provisions that regulators are putting in place in respect of whether it’s a deal or no deal.” Sklaroff went on to add that another challenge is the huge process of converting EU regulation or law into UK regulation or law, which involves something like 800 statutory instruments. “One of the things we’ve been doing on behalf, and with members, is grinding through them and then returning to the government and advising on what will, and what wont, work.” Interest in new entrants Nevertheless Sklaroff is extremely optimistic regarding the future of the asset finance industry. “Our members,” he said, “have shown, especially during the financial crisis, that they’re pretty good at getting on with the job of serving their customers, almost regardless of the economic and political weather and I have no doubt that they will continue to do so.” One irrefutable success of Sklaroff’s tenure at the helm of the FLA (and which is dear to this writer’s heart) has been the creation of the Diploma in Asset Finance (DipAF) run by the FLA in conjunction with the London Institute of Banking & Finance. Absolutely crucial to the long term professionalism of new entrants into the industry he describes it as “being devised in response to our members’ requests for a qualification that would complement existing training, and develop the expertise and proficiency of those in the industry. Some 90 asset finance professionals have graduated on the DipAF to date and some 87 are currently registered on the course. The excellent take-up from our member companies shows the success of the diploma in meeting their remit.” With an exit from his taxing role at the FLA looming, Stephen Sklaroff has no plans for rocking-chair retirement. He is an enthusiastic man still bursting with energy and relish for the industry he has served so assiduously these 12 years. Although he does not seek another chief executive role, he does wish to remain part of the scene – perhaps in a consulting or non-executive role. There is little doubt he will be in great demand. 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