News Release
22 April 2009
For immediate release

INCENTIVES FOR INVESTMENT MUST BE BACKED BY SUPPORT FOR BUSINESS AND CONSUMER LENDERS

Today’s Budget recognises that incentives for business and personal investment can help lift the UK out of recession. But many businesses can only access capital allowances via leasing, and the Budget does nothing to make this easier. Similarly, moves to boost car sales are welcome – but still need to be supported by ensuring that finance companies can help those customers who want to buy. Government support for specialist lenders remains key to re-booting much of the economy.

CAPITAL ALLOWANCES

Commenting on increased capital allowances, Stephen Sklaroff, Director General of the Finance & Leasing Association, said,

“Any increase in capital allowances is welcome. But today’s announcement will only help 1 in 20 UK businesses. Many smaller firms need to lease equipment to run their businesses and today’s tax breaks are not available for leased equipment. The Government also needs to help leasing companies by sharing risk and improving the flow of funds.“

HELP FOR HOMEOWNERS

The FLA has welcomed the announcement of additional help via local authorities for those people struggling to meet mortgage payments, and the extension of the mortgage rescue scheme to negative equity cases. 

Commenting on new help for homeowners, Stephen Sklaroff said,

“We support the extension of the Mortgage Rescue Scheme to negative equity cases, and the introduction of the new Repossessions Prevention Fund. But the Government needs to extend its funding support to specialist lenders if it really wants a more competitive and active mortgage market.“

CAR MARKET

We hope the car scrappage scheme will increase demand for cars. But if it does, the increased demand for finance – perhaps as much as £1 billion – will reinforce the need for urgent Government action to help the motor finance industry access funds at affordable rates.

Commenting on the car scrappage scheme, Mr Sklaroff said,

“The success of the car scrappage scheme relies on motorists being able to replace their old cars. For that to work, the finance needs to be available. We need Government support now, to ensure motor finance companies can meet that demand.”

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Note to editors:

¹Capital allowances enable businesses to deduct the cost of capital assets, such as plant and machinery, against their taxable income. This is only of value to businesses that have taxable income (profits).

The Chancellor’s proposals only affect businesses investing more than £50,000. To benefit from the measure announced today, businesses would need taxable income (profits) of over £50,000.

The Government’s own statistics show that, even in a normal year, at least 90% of businesses have taxable profits of less than £50,000. This year, taxable profits are likely to be significantly lower. It follows that this measure is likely to be of practical use to only around 1 in 20 businesses.

The Finance & Leasing Association is the leading trade association for the asset, consumer and motor finance sectors in the UK. Our members include banks, building societies, finance houses, credit and store card providers, motor finance companies and asset finance and leasing companies.

The facilities they provide - including finance leasing, operating leasing, hire purchase, conditional sale, personal contract purchase plans, personal lease plans, secured and unsecured personal loans, credit cards and store card facilities - account for a third of the UK’s unsecured lending and half of all car purchases.

Business
In 2008 FLA members financed £89 billion of new business. Almost £30 billion was provided to the business sector and UK public services, representing almost 28% of all fixed capital investment in the UK last year (excluding real property and own-account software). 

Consumer
The FLA is the leading trade association for the asset, consumer and motor finance sectors in the UK, covering secured and unsecured loan as well as credit and store card providers. In 2008 FLA members provided £60 billion to the consumer finance sector, representing almost 30% of all unsecured lending in the UK. 

Motor
The FLA is the leading trade association for the motor finance sector in the UK. In 2008 FLA members financed £89 billion of new business. FLA members provided £18 billion of motor finance in 2008 and financed more than 50% of all new car registrations in the UK.

For further media information, please contact:

Russell Hamblin-Boone, FLA
T: 020 7420 9656 E: russell.hamblin-boone@fla.org.uk
M: 07810 374110