IT leasing bucking overall trend of asset finance industry
IT investment through leasing in the past year totaled £1.5 billion, up 9% on £1.37 billion in the previous year*. Many businesses cut back sharply on IT spending following the credit crunch, leaving Britain’s business IT infrastructure crumbling.
The growth in asset finance for IT investment halts the overall trend of business investment through asset finance, which contracted by 1.7% over the same period, going from £22 billion to £21.7 billion. This is partly due to the withdrawal of ING from the UK asset finance market in November 2012.
The main reasons for the rise in IT investment by businesses is the boom in the use of cloud storage, the increasing number of companies supplying tablet computers to their employees, and even businesses switching to Windows 8.
Investment in IT has impact on economic growth
Philip White, CEO of Syscap until its acquisition by Wesleyan Bank in 2015 (now fully rebranded to Wesleyan Bank), commented that: “Investment in IT by British businesses can be a huge catalyst for economic growth. It has a massive impact on how efficient and globally competitive UK plc can be.”
“Cloud computing has completely changed the landscape of data storage globally. Businesses around the world have moved hundreds of thousands of terabytes of data out of in-house storage to the cloud over the past few years.”
“That has driven a huge increase in demand for storage at third-party data centres. A lot of these cloud providers are investing heavily in storage, networking and security, as their clients become more comfortable with the notion of remote storage, and more willing to put sensitive data in the hands of third party providers.”
“The penetration of tablets into the workplace has also been a major factor in the increase in IT investment. A massive number of employees across financial services, professional services and the technology sector are now given tablets by their employers to aid their productivity. This comes with a cost that some businesses are choosing to meet through asset finance.”
“Even Windows 8, despite a difficult first year in the market, has provided some impetus for businesses to invest in new IT equipment.”
Asset finance to invest in IT has grown in popularity
The use of asset finance to invest in IT hardware and software continues to grow in popularity as many banks remain unwilling to write business loans to fund IT investment.
Explains Philip White: “A lot of banks lack the specialist knowledge to assess the long-term value of IT assets, meaning they are often reluctant to write loans to fund them. This means a lot of businesses have found that asset finance is a much better fit for their programmes of investment, as the specialists in the sector have a much keener understanding of how to assess the risk in lending against IT hardware and software.”
“Leasing allows businesses to bring their IT equipment up to date without impacting on cash flow, or adding to the level of debt they carry on their balance sheets. This frees up cash for the other vital investments businesses will need to make as the economic recovery gathers pace.”
* Year end October 31. Source: FLA