have just completed my 13th
annual review of the UK
invoice finance sector. It has
been a tough year in that
the endowment element in
revenues from established
clients growing their
business has been absent as
the UK’s recession took its
toll on sales. But is has also
been a year of opportunity.
If the culture of all-asset-based lending was once heavily promoted in the
UK by American- owned financiers,
most of them are now out of the
market and the bigger UK banks have
stepped into the void. Basel 2 protocols make asset-based lending attractive to the banks and corporation
finance directors are now accepting
deals at interest margins that could
only be dreamed of by lenders just two
years ago. This has encouraged the
investment bank divisions to develop
closer links with their asset-based
finance colleagues. Barclays recently
agreed to a facility of $750m for the
Carphone Warehouse group and others will follow.
A notable feature of the bigger
bank invoice finance numbers for 2009
was the sharp decline in factoring clients. HSBC down 15% to 3018, Barclays
down 41% to 1414 and RBS down 21%
to 2996, though Lloyds TSB may be
helped by acquiring the Bank of Scotland book, only dropped 6% to 6476.
The big independent, Bibby, was up
6% with 3326 clients which now makes
it the second biggest factor in the UK
in client number terms.
Mindful that many factoring clients
exist on the borderline of solvency, the
UK recession ensured that attrition rates
were high here, but bank-owned invoice
finance houses have also demonstrated
a lessening appetite for factoring.
The smaller, independent factors of
the UK have seized this opportunity
with relish and almost all of them
recorded an increase in sales financed
as well as client numbers. This, in
turn, boosted revenues otherwise
depressed by drag from established
clients doing less business.
We saw some casualties in 2009 as
both Challenge and Charterhouse left
the arena, but both teams are back with
new badges and two more new factors
have opened their doors as well. David
Marsden, once of RDM, has launched
First Capital. John Shulman, once of
Coface, has a new operation, too.
I hear rumours of one or two American funders looking afresh at the UK so
the rest of 2010 could see some more
new names in the sector.
If 2009 was a tough year, it was
also one of opportunity as managers
invested in personnel development and
refined systems to cope with the increased prevalence of fraud, often from
once-reputable clients, but who had
come under severe financial pressure.
The UK small and medium business-funding picture is obscured by a tax
holiday agreed by the government
when the recession was biting hard. If
it saved between a quarter, and half a
million, people becoming unemployed
as the tax authorities shut companies
down, it has also left a sword dangling
Trading conditions are tough and
finding liquidity to now pay arrears
of tax is a burden that may become
intolerable unless funding can be
found. Again opportunity beckons, but
too many of the companies concerned
might not be good credit risks.
The banks are under pressure from
government to meet lending targets to
business, but they are finding it hard.
Good quality demand is just not there
and creating a fresh raft of delinquent
loans does not appeal even if it would
placate many politicians who are getting
twitchy with an election approaching.
Invoice finance in the UK experienced year-on-year growth for so long
that standards were not what they
should have been in some areas.
2009 was a year of reckoning. Managers seized the chance to create lean,
mean operations and rewarded excellence whilst releasing those personnel
that might have struggled meeting the
requirements of the new regime. Most
are now viewing 2010 with optimism. TSL
Robert Lefroy is editor of Business Money, the first dedicated commercial finance
journal in the UK. He can be contacted at