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| KN65083 |
| KEY NOTE FACTORING AND INVOICE DISCOUNTING : July 2003 |
| Overview |
Editor: Jenny Baxtern
ISBN:
1-84168-5289-3
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This report covers: factoring, invoice discounting, funding, recourse factoring, non-recourse factoring, international factoring, international discounting, domestic factoring, average payment period, prepayments,bank lending, sources of finance,leasing, hire-purchase,
Companies covered include: The Royal Bank of Scotaland Commercial Services, Lloyds TSB Commercial Finance UK, GMAC Commercial Finance, NMB-Heller, GE Commercial Distribution Finance, Euro Sales Finance, Bank of Scotland Cashflow Finance, Euro Sales Finance, Bibby Group of Factors, HSBC Invoice Finance UK,
Table of Contents Executive Summary
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Engine| Executive Summary 1 |
| 1. Market Definition 7 |
| REPORT COVERAGE 7 |
| MARKET SECTORS 7 |
| Table 1: FDA Members' Client Turnover from Factoring and Discounting in the UK and the Republic of Ireland by Sector ( percent), 1998-2002 8 |
| Domestic Factoring 8 |
| On a Continuing Basis 9 |
| Recourse Factoring 9 |
| Non-Recourse Factoring 9 |
| Invoice Discounting 10 |
| International Factoring and Discounting 10 |
| MARKET TRENDS 11 |
| Growth Exceeds Expectations 11 |
| The Rise and Rise of Invoice Discounting 11 |
| Broadening the Clientele 11 |
| Competition 11 |
| Asset-Based Finance 11 |
| ECONOMIC TRENDS 12 |
| Population 12 |
| Table 2: UK Resident Population by Sex (000), Mid-Years 1998-2002 12 |
| Gross Domestic Product 12 |
| Table 3: Index of Growth in UK Gross Domestic Product at Current Prices (index 1995=100), 1997-2001 13 |
| Inflation 13 |
| Table 4: UK Rate of Inflation ( percent), 1998-2002 13 |
| Unemployment 13 |
| Table 5: UK Unemployment Rate and Actual Number of Unemployed Persons ( percent and 000), 1998-2002 14 |
| MARKET POSITION 14 |
| The UK 14 |
| Overseas 14 |
| 2. Market Size 15 |
| THE TOTAL MARKET 15 |
| Members of the Factors & Discounters Association 15 |
| Table 6: FDA Members' Client Turnover from Factoring and Invoice Discounting in the UK and Republic of Ireland, and Their Total Number of Clients (£bn and number), 1998-2002 15 |
| All Companies 16 |
| Table 7: The Estimated Market for Factoring and Invoice Discounting in the UK and Republic of Ireland by Sector by Value (£m), 1998-2002 16 |
| BY MARKET SECTOR 16 |
| Table 8: FDA Members' Client Turnover from Factoring and Invoice Discounting in the UK and the Republic of Ireland, by Sector (£bn), 1998-2002 17 |
| Domestic Factoring 17 |
| Table 9: FDA Members' Client Turnover from Domestic Factoring in the UK and the Republic of Ireland (£bn), 1998-2002 17 |
| Domestic Invoice Discounting 18 |
| Table 10: FDA Members' Client Turnover from Domestic Invoice Discounting in the UK and the Republic of Ireland (£bn and percent), 1998-2002 18 |
| International Factoring and Discounting 19 |
| Table 11: FDA Members' Client Turnover from International Factoring and Discounting in the UK and the Republic of Ireland (£m), 1998-2002 19 |
| FACTORS AFFECTING THE MARKET 19 |
| Payment Period in the UK Economy 19 |
| Table 12: Average Payment Period in the UK (number of days), 1998-2003 20 |
| Prepayments 20 |
| Table 13: Total Factoring and Discounting Prepayments† in the UK and the Republic of Ireland (£bn), 1998-2002 21 |
| Leasing and Hire Purchase 21 |
| 3. Industry Background 22 |
| HISTORICAL BACKGROUND 22 |
| Recent Developments 23 |
| NUMBER OF COMPANIES 23 |
| Table 14: Members of the Factoring and Discounting Industry's Principal Trade Association in the UK and Their Client Turnover (number and £bn), 1985-2002 24 |
| INDUSTRY SYNOPSIS 25 |
| EMPLOYMENT 25 |
| REGIONAL VARIATIONS 25 |
| DISTRIBUTION 25 |
| HOW ROBUST IS THE MARKET? 26 |
| LEGISLATION 26 |
| KEY TRADE ASSOCIATIONS 27 |
| Factors & Discounters Association 27 |
| Institute of Credit Management 27 |
| Credit Management Research Centre 27 |
| 4. Competitor Analysis 28 |
| THE MARKETPLACE 28 |
| MARKET LEADERS 28 |
| Table 15: The UK's Top Ten Factors and Discounters by Estimated Advances (£m), 2003 29 |
| The Royal Bank of Scotland Commercial Services Ltd 30 |
| Company Structure 30 |
| Current and Future Developments 30 |
| Financial Results 30 |
| Lloyds TSB Commercial Finance Ltd 30 |
| Company Structure 30 |
| Current and Future Developments 30 |
| Financial Results 31 |
| Barclays Bank PLC Sales Financing 31 |
| Company Structure 31 |
| Current and Future Developments 31 |
| Financial Results 31 |
| HSBC Invoice Finance (UK) Ltd 31 |
| Company Structure 31 |
| Current and Future Developments 31 |
| Financial Results 32 |
| GMAC Commercial Finance PLC 32 |
| Company Structure 32 |
| Current and Future Developments 32 |
| Financial Results 32 |
| NMB-Heller Ltd 32 |
| Company Structure 32 |
| Current and Future Developments 33 |
| Financial Results 33 |
| GE Commercial Distribution Finance 33 |
| Company Structure 33 |
| Current and Future Developments 33 |
| Financial Results 33 |
| Euro Sales Finance PLC 33 |
| Company Structure 33 |
| Current and Future Developments 34 |
| Financial Results 34 |
| Bank of Scotland Cashflow Finance 34 |
| Company Structure 34 |
| Current and Future Developments 34 |
| Financial Results 34 |
| Bibby Group of Factors Ltd 34 |
| Company Structure 34 |
| Current and Future Developments 35 |
| Financial Results 35 |
| MARKETING ACTIVITY 35 |
| Table 16: Main Media Advertising Expenditure by the UK Factoring and Invoice Discounting Industry (£000), 2001 and 2002 35 |
| 5. Strengths, Weaknesses, Opportunities and Threats 36 |
| STRENGTHS 36 |
| WEAKNESSES 36 |
| OPPORTUNITIES 37 |
| THREATS 37 |
| 6. Buying Behaviour 38 |
| THE CUSTOMER BASE 38 |
| By Turnover 38 |
| Table 17: FDA Members' Customer Base for Factoring and Invoice Discounting by Company Turnover ( percent of clients), 2000 and 2002 38 |
| By Economic Activity 39 |
| Table 18: FDA Members' Customer Base for Factoring and Invoice Discounting by Economic Sector ( percent of clients), 2000 and 2002 39 |
| CONCERNS OF SMALL BUSINESSES 39 |
| Table 19: The Principal Problems Affecting Small Businesses ( percent of businesses), 2001 40 |
| FINANCIAL NEEDS 40 |
| Table 20: Breakdown of FDA Members' Clients by Turnover ( percent of clients and percent of advances), 2002 40 |
| OTHER FACTORS 41 |
| 7. Current Issues 42 |
| STATE OF THE MARKET 42 |
| A BUYER'S MARKET 42 |
| THE BRUMARK FACTOR 43 |
| LATE PAYMENT PROBLEMS 43 |
| LATE PAYMENT ACT 44 |
| 8. The Global Market 45 |
| INTRODUCTION 45 |
| THE EUROPEAN MARKET 45 |
| Table 21: The European Market for Factoring and Invoice Discounting by Country by Turnover (Em), 2000-2002 45 |
| THE WORLD MARKET 46 |
| Table 22: The World Market for Factoring and Invoice Discounting by Region by Turnover (Em), 2000-2002 46 |
| The World's Largest Markets 47 |
| Table 23: The World's Ten Largest Factoring and Invoice Discounting Markets by Country by Turnover (Em), 2000-2002 47 |
| Market Sectors 47 |
| Table 24: World Turnover of the Members of Factors Chain International (Em), 2000-2002 48 |
| 9. Forecasts 49 |
| ECONOMIC OUTLOOK 49 |
| Table 25: UK Economic Forecasts for Population, Gross Domestic Product, Inflation and Unemployment (000 and percent), 2003-2006 49 |
| FORECASTS 2003 TO 2007 50 |
| Table 26: The Forecast Market for Factoring and Invoice Discounting in the UK and Republic of Ireland by Sector by Value (£m), 2003-2007 50 |
| MARKET TRENDS 51 |
| Branding 51 |
| The Enterprise Act 51 |
| EU Insolvency Regulations 52 |
| 10. Company Profiles 53 |
| Bibby Group Of Factors Ltd 54 |
| Gmac Commercial Finance Plc 56 |
| Hsbc Invoice Finance (uk) LTd 58 |
| Lloyds Tsb Commercial Finance Ltd 60 |
| Nmb-heller Ltd 62 |
| The Royal Bank Of Scotland Commercial Services Ltd 64 |
| 11. Further Sources 66 |
| Associations 66 |
| Publications 66 |
| Bonnier Information Sources 67 |
| Government Publications 68 |
| Other Sources 69 |
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| This report examines the factoring and invoice discounting market in the UK. The market is extremely healthy; the numbers of both clients and providers of finance are increasing and the levels of borrowing are rising. In spring 2003, the industry was in a bullish mood with high hopes for the rest of the year and optimistic expectations for 2004 and beyond. |
| Key Note estimates that the market for factoring and invoice discounting in the UK and Republic of Ireland was worth £116.04bn in 2002. In value terms, invoice discounting takes a major share of the market and is showing the fastest growth, but the number of factoring clients remains high. |
| This market is showing strong growth. Key Note estimates that the total value of the market increased by 17.6 percent in 2002, which is in line with the increase in clients' sales reported by members of the Factors & Discounters Association (FDA). The market is currently described as a buyer's market, with factoring and discounting companies eager to pick up business in what has become an overcrowded industry. |
| Factoring clients are usually smaller than invoice discounting clients, thus their borrowing needs tend to be lower. Conversely, invoice discounting clients tend to be larger in size and negotiate much larger financial packages. These packages increasingly include asset-based finance, where the lending is based on physical assets and not on debtor value. |
| The major companies include: The Royal Bank of Scotland Commercial Services Ltd, Lloyds TSB Commercial Finance Ltd, Barclays Bank PLC Sales Financing, HSBC Invoice Finance (UK) Ltd and GMAC Commercial Finance PLC. |
| Europe accounts for two-thirds of the global market for factoring and discounting and the European market is led by the UK and Italy. Along with the US, these are the top three factoring and discounting markets in the world. |
| Key Note forecasts continued strong growth for the industry between 2003 and 2007, which will continue to be led by the invoice discounting sector. Some of this growth will be fuelled by a rise in the number of larger clients. As the market becomes more competitive, companies are expected to make increasing use of branding as a means of differentiating their services from those of their competitors. |
Text © 2003 Key Note
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Last updated by Amanda Porteous September 2003