After a prolonged period of sustained growth, and certainly from as far back as 1994 when Leaseurope, the trade body representing the European leasing and automotive rental industry, began collecting market data, European leasing volumes began to show signs of strain in 2008. This decrease in new business is not unlike the situation reported in this column by my fellow authors for their respective markets. However, it is important to recall that the European leasing market is made up of a collection of individual local markets (Leaseurope currently has members in 34 European countries), each with their own specificities and level of performance. At the end of the first half of 2008, leasing volumes were still progressing well in most European markets, with a few notable exceptions such as Spain and Italy. In Italy for instance, the very large real estate leasing market was already experiencing a distinct slowdown that caused overall volumes to drop. Nevertheless, in the majority of other markets, including the larger and smaller mature markets of Western Europe, volumes continued to grow.

During the second half of the year, the prevailing financial turmoil worsened and began to affect the real economy, with businesses across Europe revising their investment intentions. In combination with the extremely challenging liquidity and funding environment, this made it difficult for some European leasing firms to continue to maintain previous business levels. Preliminary market data from Leaseurope for the full year 2008 indicates that new volumes will have fallen by around 7% in Europe compared to 2007. However, another consequence of the challenging economic situation is that European exchange rates have fluctuated more significantly than in the past. If these variations are excluded, European volumes are expected to only have decreased by some 5%.

What about 2009? While European economic forecasts are increasingly more pessimistic (the European Commission predicts a 9.2% decline in investment equipment for the Eurozone in 2009), in my view, leasing still has a lot to offer. European leasing companies have an opportunity to provide those businesses that are still looking to invest with a very viable alternative source of funds they may not have considered previously. Firms who manage to seize these opportunities will be those who can secure funds, streamline their operational efficiency and manage their portfolios diligently. Granted, no small task indeed, but there will be players who can achieve this.

The funders upon whom the industry relies are of course crucial. European lessors need these banks and other funding partners to be able to continue writing business. They should actively engage with them to ensure that the risk profile of the industry is fully understood, highlighting the important link to the underlying leased asset which contributes to making our industry safer for lenders.

Without doubt, governmental support has the potential to help both the leasing industry itself as well as its clients in the coming year. While there are European level initiatives for economic recovery, a lot of the detail of these plans is left to Member States to work out. Different measures are being envisaged locally in an effort to kick start the economy and encourage lending, ranging from support for businesses who want to invest to assistance for lenders in the form of guarantees or facilities for purchasing asset backed securities. The challenge that Leaseurope members face is to ensure the leasing industry can benefit, directly and indirectly, from this support, and as soon as possible. This can de done by drawing local governments’ attention to the role and contribution of leasing to Europe’s economy.

In spite of the fall volumes in 2008, leasing was still responsible for financing on average 28% of European investment (excluding real estate). During previous periods of recession, European leasing penetration did not falter. Today, the level of uncertainty we are facing is so great it is extremely difficult to comment on how this ratio will evolve in the future. That being said, in my opinion, many leasing firms will be able to adapt and benefit from opportunities available to them. As a result, I do not expect to see a dramatic fall in European leasing penetration across the board going forward.