Despite now acknowledging that the big fiscal squeeze will cause massive public-sector job cuts, ministers expect the deficit reduction medicine to revive private-sector job creation so much that unemployment starts to fall almost immediately. Is this a realistic prospect, or naive optimism?

Optimists can point to employment forecasts from the recently established independent Office for Budget Responsibility (OBR). According to the OBR, the total number of people in work starts to rise next year (2011) and continues to rise through to 2015, resulting in a net gain in employment of 1.3 million between 2010 and 2015. Unemployment meanwhile peaks at 8.1 per cent in 2010 – just over 2.5 million – and then declines to 6.1 per cent (around 2 million) by 2015.

Given that the OBR’s forecast of net total employment growth of 1.3 million accounts for a net fall of 600,000 in public-sector employment, the forecast implies that the private sector will create 1.9 million jobs during the forecast period. This amounts to an average increase in private-sector employment of 1.6 per cent (roughly 380,000 jobs) per year.

Private-sector job creation of this magnitude would be a stretch but isn’t too far out of line with recent UK experience. The Thatcher jobs recovery in the 1980s, covering the period from the post-recession trough in employment through to the subsequent peak in employment in 1990, saw 2.97 million extra private-sector jobs created at an average rate of 2.1 per cent per year. The Major jobs recovery, following the early 1990s recession that, similar to now, coincided with a period of mass public-sector employment downsizing, saw 1.97 million extra private-sector jobs created at a rate of 1.7 per cent per year. The Blair-Brown era of job growth from 1997 and prior to the recession of 2008-9 saw 1.9 million extra private-sector jobs created, although at a relatively slow rate of 1 per cent per year.

Significantly, the faster periods of private-sector employment growth are associated with rapid rates of economic growth. What made the Thatcher jobs recovery so “jobs-rich” for the private sector was the impact of the inflationary Lawson boom in the late 1980s, which witnessed several years of unsustainably fast economic growth of above 4 per cent per annum. The pace of economic growth during the Major jobs recovery was slightly less frenetic but sadly equally unsustainable. The Blair-Brown years prior to the recession were by contrast somewhat quieter, with annual economic growth rates usually close to the 2.5 per cent consistent with mostly stable inflation. This was good for economic stability but meant a slower rate of private-sector job creation.

The key lesson to be drawn from this experience is that the UK economy needs to grow by at least 2.5 per cent per year in order to stimulate 1 per cent annual private-sector job growth. The OBR is forecasting faster growth than this in the next few years, so sees reasons to be cheerful. But the historical precedence suggests that economic growth in the next few years has only to be slightly weaker than the OBR’s forecast for the jobs outlook to appear a lot worse. Against the backdrop of massive public-sector job downsizing, it doesn’t require anything like a double-dip recession to result in a prolonged serious jobs deficit – merely economic growth in the range 2-2.5 per cent per annum rather than the above-trend growth rates the OBR expects.

Such a slightly weaker growth outcome – which many would actually consider a decent recovery given the various strong headwinds at present facing the UK economy – is easily as imaginable as the OBR’s central forecast.

The CIPD estimates that the rate of economic growth doesn’t hit 2.5 per cent until 2013, prior to which, against a backdrop of public-sector job cuts, private-sector job creation is too weak to prevent a net loss of 300,000 jobs to the economy as a whole. Stronger growth from 2013 then enables the economy to start adding jobs again with the level of employment by 2015 around 100,000 higher than in 2010. A welcome increase, but far less than the 1.3 million extra jobs the coalition government is hoping for.

In the CIPD scenario the unemployment rate rises from 8.1 per cent in 2010 to a peak of 9.5 per cent (2.95 million) in 2012, before falling to 8 per cent by 2015. This would leave unemployment still close to 2.5 million by 2015; meaning Britain faces at least half a decade of a prolonged serious jobs deficit. So will fiscal pain mean private-sector jobs gain? Yes, but probably not very much and certainly not any time soon.

Article contributed by John Philpott, Chief Economic Adviser, CIPD

Image copyright: Flickr

• Flexible contracts – customers are often put off by extended contract periods and long periods of notice of termination. They respond to very short termination periods, so that they are not tied in if they choose to leave. In practice they rarely leave anyway, but if they do, they want an easy, simplified transfer process to support them in moving providers.
• Reduced cost version of invoice discounting – many customers are comparing the cost of invoice discounting with an overdraft or loan. A low cost version of invoice discounting would enable invoice discounters to recruit huge numbers of customers that might otherwise use an overdraft or loan. Whilst the argument that “invoice discounting releases more funding than overdraft” is often true, the price premium often makes invoice discounting unattractive to the customer.
• Widen the pricing differential between factoring & invoice discounting – it often doesn’t sufficiently reflect the significantly lower workload for the invoice discounter that the customer perceives invoice discounting to involve.
• Separate funding from credit limits – increasingly the funding given against debtors has become linked to the credit limit (for bad debt protection limit) that can be written on the debtor. This prohibits many customers from using invoice finance, as credit limits in the current climate are often insufficient to release enough funding.
• Small business pricing – for the smallest of businesses i.e. those turning over less than £150K pa, even minimum service charges of £3K per annum are hard to afford. A lower cost model for the smallest businesses would open up a large segment of the market.
• No premium for selective products – some customers are interested in selective invoice finance where they can select certain debtors to receive funding against, rather than their whole, ledger. A few financiers will allow this but it is often charged at a premium which puts customers off.
• Modular pricing – customers appear to like the idea that they pay for a core service e.g. funding and then they can bolt on further services, in some cases for just the short term, for example collections support.
• Remove hidden charges – customers are often put off by the perception that there will be unexpected “hidden charges” – this could be addressed by simplifying the pricing approach. Many customers find an “all inclusive” rate attractive.

These are some of the issues that are barriers to customers buying factoring and invoice discounting products. Hence they are partially responsible for the overall contraction of invoice financing client numbers.

Some of these ideas may not be palatable from an invoice finance company’s perspective but nonetheless these are the things that customers seem to want. If the factoring and invoice discounting companies were able to address some or all of these issues it would lead to a dramatic expansion of the invoice finance market.

Article contributed by Glenn Blackman MBA MCIM. Glen writes regarding invoice finance and related matters at: www.glennblackman.co.uk and is the Managing Director of Cashflow Acceleration Limited, a specialist invoice finance brokerage.

Image copyright: Flickr

Wednesday’s Bank of England minutes recorded a repeat vote of 7-1 against a rise in interest rates. Comments from the Bank failed to provide buying support to Sterling, reiterating its previous unease over high UK inflation and weaker economic growth outlook. However, Friday’s UK Gross Domestic Product (GDP) data estimated the UK’s economy grew at its fastest pace in four years, 1.1% in the second quarter of 2010, helping the Pound back above €1.20. UK retail sales also gained, but June’s mortgage approvals fell and UK public sector net borrowing dropped less than expected.

As the markets take stock of last Friday’s ’stress test’ results, the UK has a relatively light economic calendar and is likely to rely on news abroad.

Euro (EUR)

Starting the week on the front foot, the Euro initially extended gains against Sterling and the US Dollar. Sentiment towards the Euro improved as a string of encouraging economic results were announced; the German producer price index, Euro zone purchasing manager’s index and Euro zone industrial new orders, all showed gains in their latest releases.

Although the Euro fell slightly ahead of the stress tests, concerns were eased after the results confirmed only seven of the ninety one banks failed the tests (five of them being smaller Spanish banks). Subsequently, these banks will have to increase their capital balances by a smaller than expected €3.5 billion. However, doubts remain as to whether the assumptions used in the tests were sufficiently rigorous to restore the longer-term confidence.

The GBP/EUR rate closed the week up 1.05% at 1.1956, from 1.1830 a week earlier, benefiting those converting Sterling into Euros.

Germany will have its part to play in the Euro’s performance this week. Economic announcements include German retail sales data on Tuesday, German consumer inflation data on Wednesday and German unemployment data as well as European economic confidence data on Thursday.
    
US Dollar (USD)

A lack of confidence in US economic growth prospects continues to weigh on the US Dollar. US Federal Reserve Chairman Bernanke retained a cautious stance on the US economic outlook in his statement on Wednesday. News on Friday that seven more US banks are due to fold helped the Pound back through US$1.54. Although US housing and US consumer confidence data posted positive gains, this did little to provide the US Dollar with any foothold to launch a recovery.

The GBP/USD rate closed the week up 0.91% at 1.5421, from 1.5280 a week earlier, benefiting those converting Sterling into US Dollars.

This coming week sees US consumer confidence and manufacturing index data on Tuesday. US durable goods orders data is due on Wednesday, whilst key US GDP data will be released on Friday.
 
Canadian Dollar (CAD)

After sustaining heavy losses versus Sterling during the previous week, the Canadian Dollar’s relative performance improved last week. With the Canadian Dollar helped by buoyant oil prices and generally upbeat economic data, the GBP/CAD rate dropped to intra-week lows of 1.5808.

Positive sentiment towards the Canadian Dollar was encouraged on Tuesday as the Bank of Canada raised interest rates by 0.25% to 0.75%. The Bank retained its general stance over future policy, stating that further rate rises will be dependent on both domestic and international developments. Canadian wholesale sales, retail sales and consumer inflation data all dipped slightly in their latest releases, undermining some support for the Canadian Dollar later in the week. 

The GBP/CAD rate closed the week down 0.75% at 1.5981, from 1.6102 a week earlier, benefiting those converting Canadian Dollars into Sterling.

With a light domestic economic calendar this week, the Canadian Dollar is likely to be influenced by the prices of natural resources such as oil. Canadian industrial product price data is due for release on Thursday, with Canadian GDP figures for May announced on Friday.

Australian Dollar (AUD)

Initial hopes that the Euro zone debt crisis could be receding, along with strong corporate earnings results, boosted support for higher interest rate currencies such as the Australian Dollar; with investors seeking higher interest rate returns as optimism levels improved. The minutes of the Reserve Bank of Australia’s policy meeting offered some encouragement, noting signs of the private sector taking over from the public sector as the driver of growth. However, business confidence slipped in the second quarter of 2010 and the annualised growth rate of the Leading Index (of economic growth) fell for a second month in a row.

The GBP/AUD rate closed at 1.7220, down 1.84% from 1.7542 a week earlier, benefiting those converting Australian Dollars into Sterling.

Wednesday’s consumer price inflation data for the second quarter 2010 will be the key release this week on Wednesday. The Australian Dollar could benefit if this data is stronger than expected, raising the likelihood of an interest rate rise in the August policy meeting.

New Zealand Dollar (NZD)

The New Zealand Dollar climbed against Sterling last week, with the GBP/NZD rate falling from Monday’s highs above 2.17 to lows under 2.10 on Friday. In a quiet week for domestic data, a fall in New Zealand consumer confidence to an 11-month low in July had little impact on the currency. The New Zealand Dollar took its direction from offshore developments, gaining momentum as commodity prices and global stockmarkets lifted.

The GBP/NZD rate closed at 2.1180, down 1.42% from 2.1485 a week earlier, benefiting those converting New Zealand Dollars into Sterling.

The Reserve Bank of New Zealand will announce its latest interest rate decision on Wednesday this week, with a 0.25% rise to 3% widely expected. An interest rate rise would be likely to benefit the New Zealand Dollar, particularly if the accompanying statement lifts future interest rate expectations and investors’ optimism levels remain buoyant. 

South African Rand (ZAR)

The South African Reserve Bank left interest rates on hold at 6.5%, despite Governor Gill Marcus asserting that the economy’s fragile recovery was likely to have slowed during the second quarter. The decision boosted the Rand, given some prior speculation of a rate cut. Separately, Finance Minister Pravin Gordhan cited the football World Cup as adding 1% to South Africa’s economic growth this year. Improving global stockmarkets and investor optimism also favoured the Rand, with buying support for the currency lifting as investors sought the riskier currencies with higher interest rate returns.

The GBP/ZAR rate closed at 11.4647, down 1.16% from 11.5994 a week earlier, benefiting those converting South African Rand into Sterling.

The health of the domestic economy will be in focus on Tuesday with the Quarterly Labour Force Survey (second quarter 2010). The Rand might gain further support on Wednesday if the latest consumer price inflation data is higher than anticipated.

This content is provided by Hargreaves Lansdown. Hargreaves Lansdown’s aim is to provide you with the best information to help you make your own investment decisions. Hargreaves Lansdown want to give you the best service and prices but you need to understand the risks (remember the value of an investment can fall). The transfer and custody of client monies by Hargreaves Lansdown (HL) are covered by the transitional provisions of the Financial Services Authority (FSA) as HL is an authorised Payment Institution. The marketing and service of the Currency Service are not regulated by the FSA. Please read Hargreaves Lansdown’s Disclaimer, Important Notes, Terms & Conditions and Privacy Policy.

The financial products offered by Hargreaves Lansdown which are promoted on this site have been approved by Hargreaves Lansdown in their capacity as an FSA authorised firm, together with the promotion of the financial products and all content related to the promotion. None of the information that you provide to Hargreaves Lansdown will be used by Commercial Finance Today.

Image copyright: Flickr

The ABFA asked its members, the UK’s top clearing banks and independent financiers, how beneficial the Enterprise Finance Guarantee (EFG) scheme has been to their clients. The overwhelming majority saw the scheme as providing very little benefit.

Kate Sharp, chief executive officer (CEO) of the ABFA, said: “The ABFA survey findings appear to support concerns that the scheme itself may be to blame, as the banks do not like recommending it because the benefits for both small businesses and the lender itself are just too low. The government’s intention in trying to make funding easier for small businesses is spot–on, however the scheme itself isn’t working well. The government needs to work harder at making it more usable and reduce the administrative time involved in setting it up.”

These findings come on the back of figures showing that lending under the scheme has fallen by 23% in the six months leading up to the general election

Article contributed by Factorscan

The management team has a wealth of expertise in helping SMEs to grow their businesses successfully.

Taylor added “Experience will be a key factor in the current economic climate, where the fundamental risk and credit requirements will need to be carefully managed at all levels.”

The team includes John Reed as Chairman, who is currently a non-executive of two London based banks. He also advises a number of other financial institutions and corporate entities. Two further members of the team include Mike Watson, Director of Operations and Greg Taylor, Director of Sales.

Both John and Mike have worked previously with Roger at Arbuthnot Commercial Finance prior to its sale two years ago.

For more information, please visit http://ifltd.org/

Key points from June survey:

• Further strong rise in permanent staff placements, albeit slowest in five months
• Growth of temporary/contract staff billings eased to seven-month low
• Engineering/Construction most sought-after staff category
• Improvement in candidate availability
• Wages and salaries continued to rise

Commenting on the latest survey results, Bernard Brown, Partner and Head of Business Services at KPMG said:

“Demand for workers across all sectors continued to rise in June. Clearly, the proposed public sector cuts have not yet had an impact on the UK jobs market. However, it can now be only a matter of time before we will start to see the impact of the government’s efficiency savings strategy which is likely to leave hundreds of thousands of public sector workers looking for employment. The big challenge will be to transfer as many of these jobs as possible to the private sector through outsourcing and divestment, otherwise the economy will be put under enormous pressure at all levels.”

Copies of the full report are available on annual subscription from Markit. For subscription details please contact: economics@markit.com Tel: +44 1491 461000

Re-printed with kind permission of Markit

These clients represent significantly less than one percent of even the most conservative estimate of the total number of businesses trading within the UK.

The statistics prompted the question “Why don’t more businesses use invoice finance?”

To answer this question we conducted a number of pieces of market research amongst randomly selected SMEs to understand the causes. The results were surprising and we identified low levels of promotion and advertising within the industry as a key factor.

Of the SME businesses that were surveyed, 42% were unable to name even a single invoice finance company. This is little surprise when 80% of respondents said that, over the last year, they had not seen any invoice finance related advertising whatsoever!

These findings were corroborated when we questioned another group of SMEs about the reasons why they thought that the take up of invoice finance was so low. 31% replied, without prompting, that it was because invoice finance was not promoted enough and businesses had not heard of it.

We have made it our mission to get this message out to everyone within the industry as no single organisation can address the issue alone. The potential growth for our industry could be significant if we can raise the profile of these flexible cash flow products so that they can achieve their rightful market share.

Article contributed by Glenn Blackman MBA MCIM who writes regarding invoice finance and related matters at: www.glennblackman.co.uk and is the Managing Director of Cashflow Acceleration Limited, a specialist invoice finance brokerage.

The historic launch will transform the face of British banking. Metro Bank will adopt a retail store model offering unparalleled service and convenience – a sharp contrast to the traditional UK bank branch operation.

Metro Bank will open with two stores in London; the first at One Southampton Row, Holborn followed by Cromwell Road, Earl’s Court a week later. A further 12 stores are planned in Greater London over the next two years as part of a 200+ store expansion plan.

Metro Bank will serve the banking needs of the consumer and business communities of Greater London and deposits will be covered by the UK Financial Services Compensation Scheme.

Metro Bank Business Banking will deliver personalised business banking services including credit and cash management, with local managers making local loans.

Anthony Thomson, co-founder and Chairman of Metro Bank, said: “We have been preparing for this day for a long time and are delighted it’s finally here. We plan to offer our customers a great retail experience, and we want to make banking fun for everyone.”

 Vernon Hill, co-founder and vice chairman added “Our focus will always be the customers, both retail and business, and making sure we do the right thing by them. The British public deserves a better banking experience, and Metro Bank intends to give it to them, where, when and however they choose.”

 Metro Bank’s co-founders Anthony Thomson and Vernon Hill, and its CEO Craig Donaldson, will be there to ensure doors open to customers amid a wave of celebrations to mark the first new bank on the high street for over 100 years. Customers will be greeted by three days of free give aways including free breakfasts, smoothies, popcorn and oyster card holders. Stilt walkers, musicians, jugglers and face painters will also be on hand to kick start the celebrations.

Metro Bank will offer customers:

• 7 day a week branch banking (8am-8pm Monday to Friday, 8am-6pm Saturday, 10am-4pm Sunday), 361 days of the year
• Great Online banking and a 24/7 customer call centre located in London
• The ultimate in new account opening convenience, with a rapid opening procedure and instant issuance of permanent debit and credit cards within 15 minutes
• Free coin counting at every store, for customers and non-customers alike, with the Metro Bank Magic Money Machine™
• A friendly welcome to dogs and their owners, with water bowls and dog biscuits on hand for man’s best friend – dogs rule at Metro Bank!

 Come join the revolution!

For more information or for interview requests, and filming opportunities, please contact Lansons Communications.

——————————————————————

About Metro Bank

Metro Bank PLC is registered at One Southampton Row, Holborn, London and is regulated by the Financial Services Authority.

Metro Bank was co-founded by Vernon Hill and Anthony Thomson.  It is based on the successful Commerce Bank model that was established by Vernon Hill in the US in 1973.  A UK management team has worked with Vernon Hill to help bring this model to the UK market.

Metro Bank will operate retail hours, not banking hours.  It will be open 7 days a week (8am- 8pm Monday to Friday, 8am- 6pm Saturday, 11am- 4pm Sunday), every day of the year apart from Good Friday, Easter Sunday, Christmas Day and New Year’s Day.

Metro Bank PLC. Registered in England and Wales. Company number: 6419578. Registered office: One Southampton Row, London, WC1B 5HA.

Metro Bank PLC is an independent UK Bank. Metro Bank PLC is authorised and regulated by the Financial Services Authority.  Metro Bank PLC is a member of the Financial Services Compensation Scheme established under the Financial Services and Markets Act 2000.

Metro Bank PLC is not affiliated with any other bank or organisation anywhere in the world.

Metro Bank is led by a talented team of UK Executives:

• Craig Donaldson, Chief Executive Officer, formerly Managing Director of Retail Banking at Royal Bank of Scotland
• Paul Marriott-Clarke, Managing Director, Retail Banking, formerly Managing Director, Network South, Retail, HBOS
• Darren Schindler, Managing Director, Commercial Banking, formerly CEO, Oak Capital Group
• Aisling Kane, Chief Operations Officer, formerly Director of UK Operations at Anglo Irish Bank
• Mike Brierley, Chief Financial Officer, formerly Director, Business Risk at Barclaycard

Its non-executive directors are:

• Howard Flight, Founder of Guinness Flight Asset Management
• Eugene Lockhart, former CEO of Midland Bank and MasterCard International and former President, Global Retail Banking at Bank of America
• Stuart Bernau, former Retail Director at Nationwide Building Society
• Ben Gunn, former Chief Executive of Friends Provident Life & Pensions
• Keith Carby, Co-founder of J. Rothschild Assurance
• Anthony Thomson, Chairman, Financial Services Forum
• Vernon Hill, Founder of Commerce Bank

First up, AIM-listed Ultimate Finance, whose new venture, Ultimate Asset Finance (UAF), is to be led by Andrew Ribbins, one of the key figures behind combined lender/broker Voss Finance.

Voss, incorporated in 1995, remains active in leasing to SMEs, with a focus on plant and machinery assets. It is a niche lender with a risk pricing model towards the higher end of the spectrum, and yet has suffered virtually no bad debt over the course of the recession. Write-offs only arose from the multiple finance controversy surrounding plastics manufacturer Global EPP – an issue that affected most of the UK’s lessors.

High level of control

Coming from this background, Ribbins will build a relatively small operation at UAF, lending in the single digit millions within its first year and keeping a high level of control over quality of deals.

In the months to come, UAF will move into a new office, which will also house a new regional division of Ultimate’s mainstream business.

Deals will be sourced initially from Ribbins’ own contact book, and from Ultimate’s invoice finance customer base.

Yet, while Ultimate Finance accepts business from intermediaries in its mainstream invoice finance business, its new asset finance subsidiary will not be doing so until it has built up its funding base further.

Currently, UAF has secured funding lines with Siemens Financial Services and Singers Corporate Asset Finance.

Ultimate, which has offices in Manchester, Bristol and Tunbridge Wells, also launched a trade finance business in March – another example of the company’s holistic approach to commercial finance provision.

Furthermore, the future looks comfortable for the group, with the half-year leading up to 31 December 2009 seeing Ultimate make a pre-tax profit of £191,000 (€232,000, up from £140,000 a year earlier) despite a turnover reduced from £2.2 million to £2.9 million.

While UAF will not be rubbing shoulders with the giants of UK leasing any time in the near future, its foundation represents another point in favour of the school of thought which says that asset and invoice finance can work better when under the same roof.

Asked whether there had been any difficulties in providing leasing through Ultimate’s wider sales force, who have traditionally sold invoice finance, Ribbins said: “I don’t think it is too tough to cross train for hire purchase and leasing sales.

“This is a highly professional sales force, and they know how to look at a customer balance sheet, which is fundamental to both product sets.”

“Considering that our leasing product is not too complicated, I think it will be straightforward to spot opportunities for sale and leaseback, for example, with customers looking to acquire cash by factoring book debt”

Meanwhile, another lender with the ability to provide both invoice finance and leasing products is Southampton’s State Securities. The company celebrated the 30th anniversary of its incorporation last month and predicts a promising future in lending across multiple product lines.

Best first-quarter sales

According to sales director Barry Hutchings, who joined State in November 2009, the company has seen its best first-quarter sales total in two years, and during the first half of 2010 expects to double the amount of business it signed during the equivalent period in 2009.

By the end of the year, Hutchings says, annual new business volume is targeted to reach 250 percent of the 2009 total – a dramatic return to form for the subprime specialist.

Another return to form for State could be in property lending. Having withdrawn from the commercial mortgage market over two years ago, the company has only undertaken property loans to support other lending requirements, with standalone commercial mortgage opportunities avoided.

This situation is under review, however, with commercial mortgage products looking likely to once again form part of State’s core offering through brokers. Heavily involved in this discussion will be Graham Jacobs, the property expert who joined State in 2007 after helping the company to secure its new premises.

Hutchings also sees potential for State to grow through its invoice finance offerings. “We do see a particularly strong opportunity to grow our factoring business,” he said.

Hutchings added: “We will continue to produce innovative financing solutions for customers with more challenged credits, including refinance and turnaround finance buy-outs, which a growing number of SMEs require and for which we are renowned.”

More good news

Finally, more good news has come from Microlease, the UK-based (but increasingly global) test equipment lessor with backing from LDC, the private equity arm of the Lloyds Banking Group.

The company’s revenue for the year leading to 31 January totalled £30 million, considerably up on last year’s figure of £23 million, with earnings before interest, taxes, depreciation and amortisation up from £10.6 million to £13.6 million over the same period.

The results represent the fourth year in which Microlease has exhibited more than 30 percent growth, following the management buyout which saw current CEO Nigel Brown take control of the business in 2006.

Despite its name, Microlease is as much a dealer of high-precision test equipment as it is a lessor of such kit. However, according to Brown, it is the offering of financial products, including both long-term leasing and short-term rental, that has really powered growth in the last year.

To see how well the company integrates leasing into its general equipment sales, one only has to look at the authorised technology partner arrangement Microlease has had in place with manufacturer Agilent since November last year.

As a result of this programme, Microlease is now responsible for the lion’s share of Agilent’s sales volume within the territories of the UK, Ireland and Italy, and has been offering a full suite of financial products alongside the Agilent equipment range.

For the first half of the year, says Brown, leasing penetration rates in the Agilent ATP programme was only 8 percent. By the end of the year, however, 36 percent of programme sales were being conducted through leasing of one kind or another.

Microlease has also observed a significant shift in the sectoral uptake of leasing services, with the aerospace and defence industries growing much more receptive to acquiring assets on lease – a trend Brown thinks will continue as the government customers of defence contractors suffer budget cuts in the years to come.

In 2006, the telecoms and R&D industries provided 90 percent of Microlease’s financial services business – now, the defence sector contributes an equivalent volume.

According to Brown, LDC, Microlease’s private equity backer, is “very happy” with its investment in the company, having backed its acquisition of the European operations of US competitor Telogy in September last year. The financial support also helped put Microlease in a position to acquire long term funding lines with RBS and its asset finance subsidiary Lombard, Brown said.

Keen to invest further

He added “I am confident that, if we needed more funds to make further acquisitions, LDC would be keen to invest further”, but confirmed that there were no acquisitions currently being directly pursued.

Microlease recently attempted to acquire an American business that had filed for Chapter 11, but did not win the bid. The target company was eventually sold for $26 million (€21 million).

Looking forward, Microlease expects revenue to increase from £30 million to £50 million over the 2010 financial year, with earnings before interest, taxes, depreciation and amortisation rising from £13.6 million to £18 million.
Article contributed by Fred Crawley, Senior Reporter – Leasing Life & Motor Finance

VRL — Analysis, insight, intelligence

Image copyright: Flickr

KPMG’s Report on Jobs (see below) shows that this pattern is repeated across all sectors.

Pay Pressures

The recruitment industry survey tracks both the average salaries awarded to people placed in permanent jobs each month, as well as average hourly rates of pay for temp/contract staff.

Permanent salaries

May data highlighted a rise in starting salaries awarded to successful candidates placed in permanent jobs by recruitment agencies. The latest increase was the seventh in consecutive months. Pay inflation was solid, despite easing from April’s twenty-five month high. Consultants generally commented that higher salaries were the result of employers looking to attract skilled staff.

Temp/contract pay rates

Hourly rates of pay for staff in temporary/contract employment increased for a fifth consecutive month in May. However, the rate of growth eased since April and was subdued compared with the series’ long-run trend.

Copies of the full report are available on annual subscription from Markit. For subscription details please contact: economics@markit.com Tel: +44 1491 461000

Re-printed with kind permission of Markit