Banks cut leasing lending by 16%

Leasing companies are a vital source of funding for businesses that want to invest in business assets such as machinery and IT.

Says Philip White, CEO of Syscap: "The leasing market is key to the funding of SMEs, especially while banks are still unwilling to make conventional loans to smaller companies.

"Unfortunately some independent leasing companies are struggling to get the funding from banks that they can pass on to business borrowers."

Philip White says that the trend for banks to reduce their lending to the independent leasing companies might have a very negative impact on the competitiveness of UK companies.

"If existing leases are coming to an end far faster than new leases are being funded, then that suggests that UK businesses are having to struggle on with old or redundant machinery or IT and are not expanding their operations. UK businesses can't compete effectively in a globalised market if that is happening"

Syscap explains that whilst it and a few other well-funded leasing companies are using the shortage of bank funding to increase market share, there is a longer tail of other leasing companies that have ceased writing new business.

Lending to leasing companies has fallen at a far faster rate than overall lending to private businesses (excluding financial services companies) where outstanding loans are down 10% in a year to £535.7billion (as of March 31 2011) compared to £581.7billion a year ago

At the same time as banks reduce their lending through independent leasing companies, banks themselves are reducing their provision of leasing direct to SMEs. For example, in February of this year Barclays confirmed that it would cease offering leasing to small businesses.