Backing our brokers in a changing world

Economic outlook

We’ve seen a return to growth in the asset finance market, with a 6% increase year on year in September 2021 and an impressive 20% increase over 2021*. These are encouraging indicators of resilience from UK businesses, who are showing an appetite to invest in expanding their operations, investing for growth and evolving to be more efficient. We do however face headwinds, not least global supply chain issues, unwinding government stimulus and rising inflation, including energy costs and interest rates. When we look at core UK asset finance markets such as cars and construction, these are changing more quickly than we might otherwise have expected. The new car market recorded its weakest September since 1998 showing a fall of 34.4% on September 2020**, stemming from continued challenges in the supply chain. These issues will take time to wash through and this is something we’re keeping track of when lending against elevated second-hand values. On the other hand, it’s good to see significant growth in demand for electric vehicles (EVs), with the Tesla model 3 being the most ordered new car in September 2021. The trends in demand for EVs are accelerating, along with alternative fuel options in commercial vehicles, which are encouraging developments where the asset finance industry can play an active role in supporting UK businesses. As with all new technology, the economic challenge for our industry is in confidently forecasting future valuations where evidence is thin on the ground. The construction market has also been challenged throughout the pandemic, caused by supply chain issues with limited stock of assets and materials. Despite this, UK operators remain impressively buoyant and are predicted to bounce back over the next five years as living and working practices go through a period of significant change. The extension of the government backed Recovery Loan Scheme (RLS) is welcomed, which along with the super deduction tax allowance, will play a role in supporting access to finance for UK businesses most impacted by the pandemic. Beyond these stimulants, core lending appetite has recovered strongly and as a market we are well positioned to play a critical role in helping UK businesses on the road to building back better.

Backing our brokers

Brokers play a crucial role in supporting UK businesses with advice, support and personal service. That role is more important than ever in helping businesses to fulfil their potential and contribute to the UK economic recovery. Sometimes lenders, new and old, see brokers as an easy route to market, but risk underestimating the depth of relationship, mutual understanding and partnership built over time that are essential to operate efficiently and reliably. Whilst most of our broker relationships have been built over more than 10 years, we’re relentless in listening to our brokers to continually learn and improve. We’re always taking on board their feedback to make impactful change to our business and how we support our brokers and their customers. It can be tempting to focus too specifically on the lending process in stages, but it’s the overall experience a broker and their customers have with us that leaves the longest impression. We’re committed to making sure our service adds value to our brokers to enable them to give the best possible service to their customers. Like everyone, we adjusted our operating model through the pandemic to continue to trade from our homes, and we were proud and grateful for how well our colleagues adapted. That said, we’re a people business where relationships and teamwork matter most in delivering our best service to brokers. We've been working hard to bring our colleagues back to the office safely, prioritising our core operations and support teams, so that we can offer our brokers our best. On top of this we've invested in expanding our teams to further elevate our offering, including in sales support, credit and operations to enable us to offer a first-class service. Alongside investing in human expertise, we’re complimenting this with digital solutions to drive speed, efficiency and ease. We’re now delivering regular enhancements to our online portal, Asset Backer, ranging from the smallest bug fix to simplifying the user journey to broker’s self-serve auto-populated finance documents to reduce their administration time and speed up the deal process. We’ve got some exciting plans for Asset Backer that will add a lot of value to our brokers through 2022.

Strong and consistent appetite

We’re dedicated to supporting UK businesses looking to invest in assets to help them, be more efficient and upgrade to sustainable models. Our brokers’ in-depth knowledge of their customers and their industry is vital for us being able to understand the customer’s background, plans and rationale for acquiring assets to give them the right decision as simply as possible. It’s unsurprising that with the uncertainty of the pandemic still lingering, many lenders took a more cautious approach to industries hit hardest. As the economy recovers, I’ve been encouraged by the strength of our appetite, demonstrated by our credit approvals consistently reaching levels higher than before the pandemic. Alongside saying yes to more, we’re also saying yes faster. We know that brokers need fast decisions to help them win the deal, so we’ve rolled out a state of the art, purpose-built credit decision system to offer automated decisions up to £100k. Automated decisions will never fully replace an underwriters’ experience, but they do give our underwriters more capacity to apply their expertise on the more complicated proposals where it’s needed most. We’re automating the simple, so that we can focus on the more complex deals. We’ve been known for our wide asset appetite and that continues to be a core part of our offering. Through our broad appetite, we’ve built up and invested in a wealth of expertise in a number of traditional asset verticals such as construction, agriculture, specialist cars and commercial vehicles. We’re able to deploy those specialisms to better support brokers and their customers with empathy towards their sector. Across the Aldermore group we’re excited about our plans to support the sustainability agenda and help UK businesses go green. In asset finance we want to take a leading role in enabling the investment in equipment that promotes recycling, renewable energy and electric vehicles, both cars and commercial vehicles. This is a priority for us. We recently supported one of our returning customers introduced by our broker T&L Leasing, NRG Fleet Services, a fully integrated fleet solutions provider with a £2.25 million asset finance facility for greener, cleaner technology. The facility provided specialist funding for seven new electric compact Refuse Collection Vehicles (eRCVs). These were assets new to the UK market but with our appetite and expertise, we worked with the broker to find a way to support these exciting plans that reduce pollution in the city in which they operate.

A positive outlook

We’re optimistic for the future and despite headwinds in some areas, see great opportunity for us to support our brokers to help UK businesses recover and thrive. Using our breadth of appetite, bespoke underwriting, strong commercial outlook and technology enabled service, we’re continuing to back the expertise and relationships of our brokers.

 

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* https://www.fla.org.uk/research/asset-finance/

** https://www.smmt.co.uk/2021/10/battery-electric-vehicles-power-on-despite-supply-issues-bedevilling-new-car-market/