Will finance provide the key that unlocks greater waste and recycling progress in 2018? Untha’s Marcus Brew talks finance, affordability and all things ‘balance sheet’, before asking what impact the fiscal climate will have on the waste and recycling industry in 2018…
We’ve reached the time of year when everyone is gazing into their crystal balls trying to predict how the next 12 months will unfold. And one thing I’ve been asking myself is – how will the fiscal climate change and would greater availability of finance fuel more waste and recycling progress?
But before we focus specifically on our own industry, I think it is important to assess some of the trends we’ve seen in wider markets.
Take the world of automotive for instance. When the somewhat American PCP (personal contract purchase) model was first introduced to the UK, many motor dealers scoffed. Brits have traditionally been renowned for owning assets outright so few people could see this ‘halfway house’ between a loan and a hire agreement, having any real impact.
But fast forward to the present day and PCPs have played a significant role in reinvigorating new car sales. The market has experienced five consecutive years of growth, with March 2017 the strongest single month since the Society of Motor Manufacturers and Traders (SMMT) began collecting data in 1976. Not bad considering the difficult economic times consumers have recently encountered.
So why the popularity of a finance model that many thought would fall flat?
In the motor industry, PCPs present a newfound level of accessibility for people that may otherwise struggle to attain the car they really want. Gone are the days of inflated loans or unmanageable upfront costs, in favour of affordable monthly payments. It is even possible to include bolt-on product and service packages within this fee.
I read an article last year which said that more than 80% of Mercedes’ cars are now sold via a PCP, with a seemingly habitual 2-3 year buying cycle ensuring demand remains buoyant. I’m sure this won’t be the only manufacturer able to report such a trend.
But why does this matter to the waste and recycling industry? We’re talking UK businesses, not personal contract purchases, after all.
Ultimately, I think some of the same principles apply.
Like consumers, British MRFs, independent recyclers and alternative fuel producers have similarly found the economic climate tough. There’s been a necessity to strip back processes and, in many cases, keep spending to a minimum, particularly in organisations’ quests to get more ‘fat on their backs’.
For a couple of years, the mentality for many was to buy only what was deemed essential, with cheaper assets favoured if this kept more money in the bank. And such businesses should not be criticised for this approach. For many, there was no alternative – lending was hard to come by.
For other firms, the focus was to ‘buy smart’. In these cases, it was less about the initial price tag and more about the likely return on investment or payback period. But such a procurement approach was not feasible for all, if the funds didn’t exist.
Now, as we reflect on 2017 and look to the year ahead, it’s encouraging to see more start-ups coming into the industry, and more forward-thinking long-term plans taking shape among the bigger operators.
So I think the time is particularly right for finance deals to offer a better helping hand.
Unlike the world of automotive, this is perhaps less about the personal desirability of an asset. I don’t think people buy a shredder from us just because it looks good in their plant, for example. But the greater availability of finance options, the ability to spread the cost of assets, and the option to include auxiliary products and support services in one monthly fee, will surely open the market up, both for start-ups with limited credit history and established firms that need to be savvier with their capital.