‘We may be looking at a six-month correction’ says equipment finance chief
Eamonn McMahon, the managing director of EquipmentConnect, an online asset finance marketplace for SMEs in the UK and Ireland, said the slowdown precipitated by the coronavirus would be “quite severe” but would “not last particularly long”.
In March Eamonn McMahon, who has ten years’ experience in asset-backed financing and launched EquipmentConnect in December 2019, said: “Equipment vendors foresee a material, but temporary, slowdown in the financing of new equipment.”
However, the leasing of used equipment in the current circumstances was showing signs of “holding up a little bit better.”
He said: “We know of customers who are now considering used equipment who were considering new equipment earlier, also some customers are who going for a more economical model rather than pushing out and opting for the latest high-capability model.”
He said his customers were also showing a preference for longer-term financing on the back of Covid-19.
He said: “We’ve seen evidence that customers are looking to finance equipment over a longer-term and are preferring a finance lease rather than a hire-purchase agreement, for reasons of affordability, so they can benefit from lower monthly or quarterly payments.”
A return to business as usual for the equipment financing sector in the UK and Ireland depends on the fiscal and monetary measures taken by governments and central banks, as well as the medical progress in the fight to beat the pandemic.
McMahon, however, was optimistic: “By end of Q3 the asset finance sector will be coming back out of the crisis quite strongly.”
On the sector’s return to form, he said: “We will bottom out in June and recover over the summer, with a very strong Q4.”
Data for March released by the European Commission showed that business sentiment has pulled UK sentiment to 92-points for March (down from 95.5 in February). The UK’s historical average is 100.
The EU, by comparison, saw economic sentiment fall to 94.8 from 103, the largest monthly fall since records began in 1985, in large part driven by Italy become the first EU nation to shut down its economy early in the month.
EC business sentiment figures measure the services, manufacturing and consumer sectors of the economy.
Centre for Economics and Business Research
Meanwhile, analysis by the Centre for Economics and Business Research (CEBR) suggested coronavirus could cause UK economic output to fall by 15% in the second quarter of 2020.
The CEBR predicts the UK economy may have contracted by 0.5% in the first quarter of 2020, as lockdown restrictions came into force and businesses shut up shop in the last month of the quarter.
Fitch Ratings, a provider of global credit ratings, reported on 1 April that it expects global economic growth to decline sharply in 2020. The group said it estimates that GDP growth in the UK could fall by close to 4% in 2020, “followed by a sharp recovery in 2021”.
Image courtesy of Uncompleate
Image: Eamonn McMahon