Berlin, 31st July 2015 – In the first six months of this year, the German leasing sector attracted six percent more new equipment-financing business than in the corresponding period in 2014. Leasing investments again look set to outpace the overall rate of growth in equipment investment, which in the first quarter of the current year stood at just two percent. “We’re very pleased with this result,” commented Horst Fittler, chief executive of the Bundesverband Deutscher Leasing-Unternehmen (BDL, the German Leasing Association). “For even though the German economy has been gradually recovering, investment in the private sector continues to fall short of expectations. The heads of many companies are uneasy about what the future may hold, and remain reluctant to invest in expansion. The healthy rate of growth in our sector has again demonstrated that companies consider us to be reliable partners, particularly in times of uncertainty.
The leasing of machinery increased by a very healthy 10 percent in the first six months of 2015, even though the VDMA (the German Engineering Association) recorded a slight fall in machine orders. Passenger car leasing, which constitutes the largest segment of the German leasing market, increased by seven percent. Leasing of commercial vehicles was also up (by 3.5 percent). However, the leasing of IT equipment continued to decline, and new business generated by computers, servers and printers fell by 13 percent. BITKOM (the Association that represents Germany’s digital economy) also reported a significant across-the-board drop in IT hardware orders. Fittler sees this as an unmistakable sign of how wary companies have become about their prospects. “If the outlook is uncertain,” explains Fittler, “IT investments are the first to be put on hold.”
Indeed, over the course of the first half of the year, there was a perceptible decline in the rate at which new leasing business was acquired. Whereas equipment leasing in the first quarter was seven percent up on the figure for the same period in 2014, the rate of increase fell back to just under five percent for the second quarter. The leasing of cars and commercial vehicles was the main engine for this growth, though there was also a 4 percent increase in the leasing of new machinery.
BDL Calls for Further Investment Incentives
The BDL’s Managing Director gave a sober assessment of the prospects for the second half of the year. “If current forecasts are correct, investments in equipment will increase by around three percent in 2015. The leasing sector is expected at the very least to keep up with this rate of growth, and more likely than not will exceed it. But the situation is still unsatisfying.” According to Fittler, the annual investment shortfall in Germany currently stands at 80 billion euro. And he is adamant that a short-lived economic upturn will not close this gap. He believes a sustained drive to promote investment is needed. “If the German government’s ‘Industrie 4.0’ plans to revolutionize the production landscape are to be realized, and the German economy is to assume a leading role in a highly competitive international marketplace, immense investments will have to be made.”
“If expressions of intent are ever to be translated into real investment, our political and economic policymakers will have to provide direction,” says Fittler. “We need fiscal incentives, and the reintroduction of the declining-balance depreciation method would be a good place to start. Together with a number of other trade associations, we have been campaigning for this for years.” Such a measure, he claims, would produce results very quickly, and would impose no additional costs, for any initial reduction in revenue would be made up for by increasing tax takes in succeeding years. “And by encouraging much-needed investment, it would have the effect of revitalizing the economy, which in itself would help boost tax revenues.”