In another tough month for leasing brokers, the UK’s tier one funding landscape grows smaller yet.

In any other month of any other year, the withdrawal of Hitachi Capital from all of its non-agricultural broker relationships would have been headline news to British lease introducers.

But this month, the severance was just a footnote to the market exit of Lombard a week earlier, including its vehicle finance unit, Lombard Vehicle Management (LVM).

Lombard Business Finance had been teetering on a depleted broker panel for most of the year so far, and with pressure from RBS to consolidate and wipe out non-conservative lending, the demise of its introduced business desk was a question of “when” rather than “if”.

But LVM, one of the nation’s busiest suppliers of contract hire business, came as more of a shock – especially to the 85 members of staff made redundant by the decision.

Andy Bell, the NACFB’s director for vehicle finance, expressed sympathy for LVM’s employees, but gave the funder a less than glowing eulogy:

“Speaking to several brokers (my phone never stopped ringing), opinions varied as to the effect that LVM’s demise will have. The consensus seems to be that LVM was not the most efficient funder, with processing times being far slower than average.  Indeed, in some cases brokers reported working with dealers who simply refused to supply if LVM was funding the deal.”

“But, in many cases their rates were considerably lower than average, and their commissions considerably higher. In a market place as competitive as vehicle leasing, if your competition was using LVM, you had to use them too.”

Managing director Martin Brown of Fleet Alliance, one of the country’s top five fleet brokers, went one step further, calling the change “an excellent thing” for the fleet market.

In his opinion, the “price led, volume driven” business model behind LVM had taken fleet brokers’ focus away from customer service – an area which he felt was key to making introduced business good value for money.

But the fleet broker culture has had other business sources to rely on, such as LeasePlan’s broker division Network, Arval, BNP Paribas, and the gathering edifice of Lex Autolease.

As Brown readily admits, the ground is looking a lot more sparse for general asset finance brokers. He speaks from experience – Fleet Alliance made an abortive entry into general asset finance in 2008, a time which he calls “the worst possible moment” for his firm to have done so.

Now, with Lombard gone entirely and Hitachi moving – in the words of business finance head Robert Munn – to “more profitable, less risky and more sustainable” business, the situation seems to have worsened further.

John Barter, MD of Oak Leasing, probably put it most succinctly, commenting simply that UK brokers were “having a really, incredibly crap time of it”.

There is good news though, in the form of ING Lease – virtually the only volume player left on the tier one landscape. The Dutch-owned lessor seems ready to take on more broker relationships, having circulated information to that effect among NACFB members shortly after last month’s withdrawals.

UK head Chris Stamper commented on recent events: “We’ve certainly thought about what this means, and we’re still very comfortable with broker business, remaining totally committed to that market.”

“My only concern is that we will encounter admin problems if the market gets as busy as it was 18 months ago and we retain the same market share – we will have to ramp up the scale of our operation considerably”

He continued to explain that ING would not necessarily soak up all broker business left stranded by the others’ withdrawal from the market, and would maintain its standards for the required quality of introduced business.

On the other hand, he said, margins would likely remain unchanged too. “I want to give brokers the tools to compete with direct sales forces, and that means not letting brokered asset finance become a premium priced product. If brokers can compete with direct sales in terms of price, the service advantages will be more readily apparent”.

Stamper also noted that more and more brokers had increased the level of funding drawn from smaller or more specialised lenders, commenting that the amount of business placed with smaller finance houses across the UK combined to make up a “highly significant” total.

Other funders used by UK brokers include relative asset finance newcomer HSBC Equipment Finance, which has been happy to include introduced business in its growth plans, and operations owned by private banks such as Arkle Finance and Aldermore.

Independent lessors too, such as Grenke Leasing, CHG Meridian, 1pm and Private & Commercial Finance (PCF), have all maintained interest in the UK broker community. Although few of these smaller players are looking to actively recruit brokers at present, they are largely enthusiastic to maintain current relationships.

Robert Murray, head of PCF, spoke strongly in favour of the broker model – his business draws in around 75 percent of its volume from a group of 20 broker firms, and has around 100 active introducers altogether.

“We take a different view from some of the funders that have “culled” brokers in the last year – our brokers give us a nationwide presence, regional, asset and industry expertise that we couldn’t achieve alone, and a scalable sales model that allows us to adapt to different levels of business without having to hire or lose permanent staff. We’re not taking on new brokers right now, but we’ll certainly maintain our current panel, many of whom we have enjoyed a good relationship with for at least 10 years”

Certainly, the UK broker market is receiving nourishment from somewhere. Although not yet accounting for September’s changes, latest statistics from the NACFB’s annual member survey have revealed that the UK’s asset finance brokers are faring better than almost all other commercial finance introducers.

While NACFB members’ leasing business was down 10.3 percent year on year to a figure of £997 million at 2009’s midpoint, the drop was mild compared to that seen by brokers selling buy-to-let mortgages, a sector that plunged 88 percent from £3.9 billion to just £476 million.

Despite more volume funders remaining open to brokers in the motor finance world, those NACFB members classifying themselves as vehicle finance brokers reported business down 30 percent to just £759 million.

In fact, the only introducers to report a year-on-year upsurge in business were those working with invoice discounting products – ID saw a 21 percent rise from last year’s figure of £688 million to reach £831 million.

What’s more, as far as is known, no major funders are pulling back their links in this area – in fact, Hitachi Capital was at pains to point out that despite the asset finance withdrawal, they would be looking to grow their ID business line over the next year.

Perhaps now would be a good time for leasing brokers to think about training their staff to sell new products…

Contributed by Fred Crawley – Reporter, Leasing Life & Motor Finance – Leasing Life

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The views contained in this article are solely those of the author and do not necessarily represent the views of the Commercial Finance People