Europe’s rental companies need ‘genuine strategies’ says Déprez

European rental companies need to develop meaningful strategies in the face of the ongoing Eurozone crisis, said Gérard Déprez, president of the European Rental Association (ERA).

"The challenge calls, even more than ever, for the necessity to implement a genuine strategy", said Mr Déprez, speaking at the ERA's annual convention in Oslo, Norway. "If it seems obvious to implement a strategy in a predictable environment, [the time for] strategy comes when forecasts are no longer possible."

Mr Déprez, who is CEO of Loxam, said the Eurozone crisis was hitting rental companies in two areas, with government austerity measures reducing construction activity and the lack of finance placing severe constraints on rental operations.

The crisis of liquidity and sovereign debt meant that governments faced with recession "do not have any longer the financial means to lead a Keynesian stimulus policy - policy which is generally favourable to the construction industry and therefore indirectly to our own trade."

This has led Europe's rental sector to drop behind those of North America and Japan in terms of growth. The ERA downgraded its growth estimates for Europe during the convention.

In addition, Mr Déprez said new banking regulations would have a major impact on the debt and financing of rental companies; "Today, European companies are dependent for 70% of their financing on the banking sector, while in the USA, bank financing merely stands for 30%.

"It is clear now that this severe crisis will profoundly alter banks' behaviours, and most certainly European rental operators' borrowing capacity. Eventually their expansion will be hindered."

Mr Déprez said the current climate called for a more cautious approach by rental companies, "each aiming at saving foremost its own business: ‘once bitten, twice shy' as the saying goes."

However, he noted that the rental industry was showing some resilience in the face of the crisis; "All studies confirm a growth of rental penetration even during cycle lows. Global insight's forecasts anticipate a growth of rental in Europe for the forthcoming years. It is a good omen for the whole sector"

Next year's European Rental Association convention will be held in Paris on 15-16 May, 2013.

A full report on the Oslo convention will appear in the July-August issue of International Rental News (IRN).