Gaining ground?

As far as current business conditions are concerned, sentiment at first glance seemed to have improved in the fourth quarter ERA/IRN RentalTracker survey. Indeed, 31.9% of overall respondents reported improving conditions and 23.5% reported deteriorating conditions, resulting in a positive balance of +8.4% of respondents.

While this is undoubtedly better than the +1.7% balance at the end of the third quarter, the last survey was notably more downbeat than the rest of the year. This makes any improvement in fourth quarter sentiment paint perhaps an unrealistically rosy picture by comparison.

Indeed, the balance of opinion for current business conditions at the end of the second quarter of last year was 32.5%; demonstrating that fourth quarter sentiment is still far off levels that we have seen in the recent past.

Continuing the trend of previous quarters, the UK consistently topped our charts or came a close second on every survey question. This reflects the generally better GDP growth performance of the UK economy and an associated upturn in building activity – particularly housing – that is having a positive impact on the rental market.

It is worth making the point that we get more responses from the UK than any other country, so positive results in the UK skew the results for the whole of Europe. However, the proportion of UK results in the total survey has not changed significantly (UK respondents tend to represent between 10% and 15% of overall survey responses), so we are recording broadly like-for-like changes between quarters.

The UK was joined by Nordic countries and Germany in fairly consistently beating the European average for most survey questions, while – generally speaking – respondents from France, the Benelux, multinational companies and Italy tended to register below the European average for the fourth quarter survey.

Q4 Growth

Overall, 40% of all respondents reported year-on-year growth in the fourth quarter, compared to 39% in the third quarter. The UK came top with 77%, up from 73% in the third quarter, followed by Germany and the Benelux. The biggest faller, however, was the multinational sector, where just 8% of respondents reported growth, down from 45% in the third quarter.

In fact, sentiment from the multinational sector slipped almost across the board compared to the last survey, with only employment intentions and utilisation trends showing improvements from the third quarter, albeit marginal.

Multinationals also remain among the least optimistic looking ahead a year – only French companies had fewer respondents forecasting ‘much better’ business conditions 12 months from now.

French respondents were not only the most downbeat on conditions in a year’s time, but at -62%, also scored the lowest balance of opinion on current business conditions in the fourth quarter – deeper than the balance of -40% seen in the third quarter.

Meanwhile, there were some strong gainers when it came to investment sentiment – topping the table of respondents expecting to increase investment by over 10% in 2015 were Nordic companies, with 80% stating that this was the case, a big rise compared to the 38% in the third quarter.

The UK came second on this question, with 48% of respondents planning on upping investment by over 10% in 2015 (after the higher levels of investment already seen in 2014), while the European average stood at 31%. Nevertheless, the overall positive balance of respondents expecting to increase fleet investment in 2015 stood at +10.6% – this is actually its lowest level since the third quarter of 2013.

As far as forecasts for 12 months’ time are concerned, the most upbeat set of respondents came once again from the UK, with 82% forecasting business to be better or much better a year down the line. This represented an improvement on last quarter’s 64%.

Nordic, Italian and German respondents also beat the European average for this metric, which stood at 43% for the fourth quarter, down slightly from 45% in the three months to the end of September 2014. Across Europe at the end of last year, less than half of respondents were expecting better business conditions in a year’s time.

Respondents from Southern European companies also registered more positive sentiment than in previous surveys. Spain and Italy reported some improvements in the fourth quarter, particularly in time utilisation trends (Spain) and forecasts for 12 months ahead (Spain and Italy).

However, the sample size for Spain remains stubbornly low, so Spanish results should be treated with a degree of caution. And, of course, any improvement in Spain and Italy has to be viewed in the context of a downbeat wider economy.

Overall for Europe, the balance of opinion (the difference in the proportions of respondents seeing positive and negative trends) on time utilisation stood at +22% at the end of the fourth quarter, a big jump compared to the +3.2% that was registered in the third quarter survey, and the second highest level for 2014 as a whole.

Strong sentiment from Germany and the UK skewed this metric somewhat, with 83% of Germany respondents reporting increasing utilisation in the fourth quarter, and 81% of UK companies.

Employment intentions also recovered compared to the downbeat third quarter, with an overall balance of +14.6 of respondents saying they expected to increase their number of employees in the next quarter. However, this was still the second-lowest balance of opinion on this question for the year 2014 as a whole.

Russia

The fourth quarter survey also attracted enough respondents from Russian rental companies to warrant inclusion – albeit still a small sample that should be treated with caution. When it came to current business conditions, the balance of opinion evened out at 0%, with as many Russian companies feeling conditions were improving as those that felt they were deteriorating.

On other questions, 17% of Russian companies reported year-on-year growth in the fourth quarter, 16% said fleet utilisation was increasing, 80% said they would employ more staff in the next quarter, 50% felt business conditions would improve in 12 months’ time and 20% said they expected to increase fleet capital expenditure by over 20% in 2015.

So a broadly positive picture from Russia – contrasting pretty sharply with the bad economic news coming out of the country – but with no recent point for comparison, it is hard to draw any conclusions. We hope to add to our analysis of Russia in the next survey.

Wait and see


Perhaps the renewed sense of economic uncertainty that permeated Europe during the final three months of the year has prompted rental companies in general to opt for a “wait and see” approach as we enter the New Year.

Indeed, economic conditions in the fourth quarter were comparable to those that the market saw at the end of 2013, when it became obvious that a sustained, growth-fuelled recovery in Europe was not materialising.

Undoubtedly a mixed picture has emerged from the fourth quarter ERA/IRN RentalTracker survey, but the results are broadly positive in that they represent improving sentiment in a volatile climate, albeit skewed to some extent in favour of the UK. It will certainly be interesting to see if this momentum continues into the second quarter.

The RentalTracker for Europe is a joint venture between IRN magazine and the European Rental Association (ERA). The full survey results, with extra graphs, will be published in the Jan/Feb issue of IRN.

If you have suggestions about how the survey could be improved, then please contact the ERA on ERA@erarental.org or Helen Wright, IRN Editor, at helen.wright@khl.com