AF50UK 2020: 25 years of gradual change in asset finance

When we published the first edition in 2016, AFI’s chief executive officer Edward Peck wrote: “It comes as a surprise to realise that there hasn’t been a thoroughly researched ranking survey of the UK asset finance industry produced in the 21st century.”

The last survey in the 20th century was published by Her Majesty’s Stationery Office in 1995, a weighty volume with the to-the-point title ‘Equipment Leasing in the UK’.

So, five years on, and also 25 years on, what has changed? Here are just a few high-level comparisons:

• In the past five years the UK leasing industry has had a Compound Annual Growth Rate (CAGR) of 5%. Total net investment in leasing by accounting years ending 2018 or 2019 was just over £40 billion. Over the past 25 years, the industry CAGR has been around 2% at nominal prices.
• 25 years ago, the top 10 firms accounted for 63% of the market. Throughout the five years of the AF50, the figure has been around 57%.
• Lombard was the largest firm 25 years ago with 20% market share of new business and has maintained its Number 1 position in each edition of the AF50. It now has around 14% of total net investment.
• 55% of volume was financed by non-UK owned firms in the latest AF50, up from 52% five years ago. 25 years ago, despite many US and Japanese firms being named in the leader players table, UK firms controlled at least 80% of new business.
• Five years ago, operating leases represented 28% of total net investment, dominated by fleet and rail leasing. In 1995, operating leases accounted for around 11% of new business, noting that the first year of the rolling stock lessors’ accounts would have been after the 1995 report. Operating leases now account for 25% of total leasing, following lower growth in this part of the market in the last two years.

What can we take from this? Leasing is a mature sector, with modest growth rates and mostly well-established leading firms.

At the same time, it is also an unusual part of the UK financial services market, as for the past 25 years it has been both relatively unconcentrated and quite diverse.

Below the surface, we find vibrant competition as channels of distribution change, UK and international firms entering and leaving the market, and (slowly, perhaps far too slowly at this key moment in our history) a secondary market for leasing portfolios developing as a sustainable way of funding independent lessors.

As Edward wrote five years ago, it may be gradual, but the market dynamics are changing. The AF50 is here to monitor and objectively report those often subtle, but still vitally important, changes.

* Julian Rose is director of Asset Finance Policy  and is responsible for compiling the data for the AF50 and the AF Europe 50. He is joint author of the A to Z of Leasing and Asset Finance and also publishes reports on employee costs, impairments, and large UK lessees.

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