Industry Outlook Survey

Overview

The FLA’s Industry Outlook Survey gauges senior executives’ opinions across the asset finance, consumer finance and motor finance markets about the outlook for the UK economy and the markets they represent.  The Q1 2021 survey results are based on results received from 79 FLA members between 16 December 2020 and 8 January 2021 and therefore capture some of the recent developments in the economy.

Respondents overwhelmingly identified the Covid-19 pandemic as the key threat to the outlook for the economy and FLA markets over the next three and twelve months. Prolonged uncertainly would increase the risk of higher unemployment levels, business failures and impairments.  The trade agreement reached by the UK with the EU was a positive development, but businesses will face disruption in the short-term as they adapt to the new customs regime.

Respondents also identified opportunities for FLA markets in the coming year as the vaccine rollout gathers pace and lockdown restrictions begin to ease. The underlying pre-crisis strength of FLA members has helped them weather the pandemic so far and the specialist knowledge of finance providers means the industry is in an ideal position to help drive forward Government initiatives such as levelling up and net-zero.

Respondents also saw opportunities in developing and improving online offers and the digitalisation of processes more generally. For example, we have seen finance providers scale-up click and collect services over the past year.  The strength of used car demand and residual values within this market are expected to provide opportunities for new business growth in the consumer car finance market during 2021.

Unsurprisingly, 85% of respondents expected economic conditions to worsen during Q1 2021 compared with the previous quarter. Over the next twelve months, 52% of respondents expected some improvement in economic conditions, while 44% expected conditions to worsen (Fig. 1).

If the third UK-wide lockdown and the vaccine rollout are successful in bringing the Covid-19 crisis under control, the majority of respondents expected growth over the next twelve months – almost 70% of respondents expected some increase in new business over that period, with 37% expecting new business to increase by 10% or more (Fig. 2).

The majority of respondents expect no change in the availability of funding over the next three or twelve months - 84% and 77% respectively (Fig. 3).  Just over half of respondents (51%) expected the cost of funding to remain stable over the next year, while a third of respondents expected some increase in funding costs.  

 Over the next twelve months, 40% of respondents expected some increase in employment by their companies, 36% expected no change, while 22% expected a slight decrease (Fig. 4).

When considering how the number of customers in arrears would change over the next twelve months, the majority of respondents (68%) expected a slight increase, with only 9% expecting a significant increase (Fig. 5). The asset finance, consumer finance and motor finance markets have given unprecedented support to their customers since the pandemic began granting more than 1.5 million requests for forbearance.

However, respondents were less optimistic when asked about UK business insolvencies.  92% of respondents expected some increase in the number of UK business insolvencies over the next twelve months, with almost half (49%) expecting a significant increase (Fig. 6).  

90% of respondents expected some increase in the number of personal insolvencies over the next twelve months, with almost two thirds (64%) expecting a slight increase (Fig. 7).

Over two thirds of respondents expected some increase in the number of retail motor dealership insolvencies over the next twelve months, although most (54%) expected this increase to be slight.  31% of respondents expected no change (Fig. 8).

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