cFi: nacFb Looking forward


The NACFB looks back over the last twelve months to see if there is any evidence of the mythical recovery – or whether the dreaded double dip is taking effect


by Adam Tyler, chief executive, NACFB


Frightening as it is to admit it, the end of the year is fast approaching. This means the NACFB office is busier at this time of year than normal but it is also a useful time to take stock and analyse the changes wrought in the previous twelve months. Obviously the key question is whether


things have improved for brokers and the SME market over the last year and, although we’re far from hanging out the bunting at the passing of one of the worst economic periods in recent history, the answer – at least in part – has to be a cautious ‘yes’. Part of the evidence for this comes from


the results of our annual survey which we published a month or so ago revealed that members had written over £7.5bn of business, an increase of 17.66% on the previous year. As I said at the time, this wasn’t a reason to get hugely excited, given that the base figure from the previous year had been incredibly low (a fall of nearly 60% on the previous year) but at least there had been some movement in a positive direction.


Positive There is other positive news for the Association too. Over the last few months more lenders are looking to join the Association; to support the work it does in encouraging best practice in the broker market. Some are new lenders; others are old Patrons returning to work with us after taking a year or so to weather the market storms. We hope this gives some indication of renewed optimism in sectors


of the market – and a new embracing of broker-introduced business. Brokers too are starting to think laterally


in terms of the finance options available and are proving just how resourceful they can be and how valuable they are to their clients. Obviously the popularity of products such as factoring and invoice discounting increased dramatically as the market contracted as these were lenders still willing to fund business’s cashflow. Some have gone even further in the quest to fill the funding gap and, as I mentioned in my last article, some are turning to private finance; looking for individual investors to put their money into small businesses. Despite these improvements, however, it


would be wrong of me not to point out that there are still certain sectors which have seen little improvement. Leasing and asset finance is still a tough market for a broker to make a living, and even experienced brokers have struggled. There was some suggestion that conditions had eased at the beginning of the year – but these have long since closed down again. There is one ‘tier one’ (prime business) funder who has remained in the broker market but aside from them a broker’s choice is hugely restricted. Evidence from the survey suggests that these brokers are branching out to look at vehicle finance as a method of diversification and survival.


imPact on brokers There are brokers who have taken the decision to leave broking and find work in other parts of the industry – or away from financial services altogether. Since the ‘crunch’ began, membership of the NACFB has fallen by 27% - the majority of these falling away in the first twelve months of the market contraction. Much of this has to do with timing, however, as the impact


on the commercial industry happened roughly six months after the residential mortgage market. The result was that a tide of residential market refugees washed in looking for alternative income streams, although they washed straight back out again when their lack of experience in the commercial arena meant they found it virtually impossible to write any deals.


Double DiP? So is there going to be a double dip? Or are we already in one? The commercial finance arena doesn’t exist in isolation and the recently announced austerity measures will have a huge bearing on whether we are currently bumping along the bottom, or whether there will be another downward turn. The well-publicised cuts to public services will impact on the private sector economy as public sector work outsourced to the private sector is a likely target for cutbacks. Also jobs will be lost in the public sector, which is bound to impact the private sector as many of those public sector workers will be private sector customers. Some commentators have suggested that the housing market is already in the second trough of a double dip. For the commercial intermediary market


my suspicion is that the impact could be muted, simply because the starting place is so low. Even though the UK has been officially out of recession for some time now, frankly, in parts of this sector it really hasn’t felt like it. There has been little in the way of freeing up of the credit markets; lenders are still struggling and so, as a result, are the brokers who rely on them. Because of this I suspect that any small decline won’t be felt particularly and may well seem like more of the same. But a sharper decline will hit the struggling industry hard and will be the last straw for many who have held on for this long.


mortgage introducer DECEMBER 2010 39


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