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John Paul Getty, the oil tycoon said to be the richest man in history, once remarked: "If it appreciates, buy it. If it depreciates, lease it."

Spending matters: how sensible spending is supporting growing industry

Posted: Tuesday, 11 February 2020 @ 10:45

When we are anxious about things like the economy, and our general sense of security, it’s a natural instinct to clam up, to hoard, to hibernate, to save instead of spend. Of course, saving is a fundamental part of good financial management. However, when it comes to business, carefully managed and strategic spending is also a fundamental part of growth, both for the individual company and for the economy as a whole.

All that being said, the challenge to spending for growth, especially when you also want to keep a buffer zone in place, is cash flow. That’s where asset finance can, and is, proving fundamentally helpful. Bridging a gap and providing secured loans with specific intent, the asset finance industry is proving that the right kind of spending is healthy for all.

Fuelling growth in the UK

It seems that on this, UK SMEs are largely of a similar mindset as figures from the Finance & Leasing Association (FLA), the leading trade body for asset, consumer and motor finance in the UK, showed that asset finance hit record levels last year. 

The figures showed that in total, FLA members provided a record £137bn of new finance to UK businesses and consumers last year, up from £128bn in 2017. Within that, new business hit a new high of £32.5bn to mark an eighth consecutive year of growth.

In the first quarter, asset finance grew by 11%, with particularly high growth in IT equipment finance. By June it had continued to grow with new business in the plant and machinery finance and business equipment finance sectors up by 8% and 9% respectively.  In the final quarter of 2019, total asset finance new business grew by 2% in the UK. The IT equipment finance sector reported 43% year-on-year growth.

Clearing the path for a strong and steady future

Geraldine Kilkelly, head of research and chief economist of the FLA, said: “The asset finance industry is on track to report a record level of new business in 2019 of around £35 billion. The industry has provided support to businesses keen to invest in new technology which will increase productivity and maintain competitiveness.”

In short, the industry seems to have been representative of a ‘keep calm and carry on’ approach by business owners, which is starting to reap dividends. While projections for overall UK economic growth remain modest for this year, the determined attitude of businesses and individuals, is proving to be a rewarding one. It also seems that with the help of careful thought and informed planning asset finance is helping to clear the path. 

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