Companies in the industry are charging more to lend funds
London, United Kingdom (PRWEB) July 17, 2012
Factoring industry revenue is estimated to grow by an annualised 2.1% over the five years through 2012-13. Industry revenue in 2012-13 is estimated to total £2.42 billion, with growth of 2.8% from the previous year. This includes a large fall in 2009-10 as the financial crisis reduced business activity and factoring demand. While IBISWorld estimates similar revenue growth is expected over the next five years, the nature in which this will be achieved will be quite different.
Over the five years through 2012-13, the industry concentrated on accessing as much funds as it could at the cheapest possible rates, and subsequently lending them to businesses of all types purely to generate growth in their lending books. To do so, they lowered their lending standards and lent to less-creditworthy customers in attempts to maintain market share level. However, this led to the industry's downfall in 2009-10, when revenue declined by 8.7% as the financial crisis deepened and customers began defaulting on loans, particularly those less-creditworthy customers. The lessons learnt from the crisis days will lead the industry to focus on lending to a higher quality of customer, having increased its lending standards, and industry players will charge higher interest margins on loans, pricing less-creditworthy customers out of the market. This will constrain the pace at which the industry can grow revenue, as the potential pool of customers to whom they can lend will be smaller. As such, revenue will grow at a slower and steadier pace from year to year over the five years to 2017-18, with less loan loss and provisions incurred, which will positively affect profitability.
IBISWorld estimates that the four largest enterprises in the Factoring industry control about 22.6% of the total market. As such, the industry is considered to have a low level of market share concentration, with no one player holding a significant control of the market to be able to influence pricing and competition alone. For this reason, the industry is highly competitive, as a large number of enterprises compete for lending volumes from the United Kingdom's commercial sector. The largest enterprises in this industry are Lloyds TSB Commercial Finance, RBS Invoice Finance and HSBC Invoice Finance (UK) and Bibby Line Group. They top 3 being associated with banks have the capital strength and the geographic spread to sufficiently cater for the short-term financing needs of commercial enterprises located throughout the country.
For more information on the Factoring industry, including latest industry trends, statistics, analysis and market share information, purchase the full report from IBISWorld, the nation’s largest publisher of industry research.
IBISWorld industry Report Key Topics
Companies in this industry specialise in debt financing and invoice discounting. Factoring involves a company selling its accounts receivable to a third party as a means of accessing cash to finance further business activity without having to wait for their debtors to pay them.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalisation & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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