Latest RentalTracker highlights European caution

23 April 2013

The first quarter of 2013 saw little dramatic change in confidence levels in Europe’s rental sector, according the latest ERA/IRN RentalTracker survey, with caution on capital investment and generally stable revenue and time utilisation trends indicative of the uncertain economic outlook in the region.

That said, there are signs that Europe’s rental companies are hopeful of a better environment in 2014, with more optimism over business levels a year from now and increased fleet investment plans for next year.

The wide variation in confidence levels in Europe remains, with Italy and Spain still in the doldrums, but there were definite signs that Eurozone uncertainty had impacted on confidence levels in other markets, notable Germany, where results on current business conditions, investment plans and utilisation were all in the bottom half of the ‘confidence league’.

German renters reported a -43% balance of opinion on current business conditions – compared to a neutral view in the final quarter of 2012.

More than 190 rental companies in Europe responded to the survey in the final two weeks of March and first week of April. The RentalTracker is a joint venture between International Rental News (IRN) and the European Rental Association (ERA).

In the main confidence measures, the balance of opinion on ‘business conditions now’ – that is, the difference in the proportions of respondents reporting improving or deteriorating conditions – improved slightly to -7.2%, a marginal improvement on the final quarter of 2012 but still a negative balance. It is the fourth quarter in a row that more respondents have reported worsening conditions than have reported improvements.

With time utilisation, the trend in the first three months of the year showed a slight deterioration compared to the final quarter of 2012, although still with a balance of opinion of +5.1%. This figure is the lowest level since the final quarter of 2009.

In terms of levels of business activity in the first quarter, there was still a positive balance of opinion, but only just (+1.8%). Broadly speaking, a third of respondents saw an improvement, a third saw no change, and a third reported lower activity levels – a picture that has remained pretty much unchanged for the last five quarters.

There was a slight increase in the proportion of respondents expecting to add to their workforce, with a positive balance of opinion of +17.2% compared to +11.5% at the end of 2012. Two thirds of companies plan to make no changes to their employment levels, a situation that has remained constant for the past year.

More positive is the result on expectations a year from now, where there has been a big jump forward in the proportion expecting markets conditions to be better, from 39.2% in the previous quarter to 53.8% now. There is now a positive balance of opinion of +39.6% on conditions a year ahead, which is the highest level since the first quarter of 2011.

On a geographical basis, it is the hardening of opinion in Germany that is most notable from the survey. German renters reported a -43% balance of opinion on current business conditions – compared to a neutral view in the final quarter of 2012. This was reflected also in the fleet CapEx plans of German renters, with just 27% of respondents expecting to increase investment by at least 10% this year, and just 9% expecting significant increases next year – the lowest figure in the survey.

UK rental companies are among the most likely to be increasing investment this year and next – probably reflecting the fact that the recession from which the UK is now slowly emerging has choked back investment in recent years.

Russian companies are the most likely to increase their investment by more than 10% - 40% said they would do so this year and a massive 60% will do so again next year. Russia remains the most positive rental market in Europe.

German and Italian companies were among the least likely to report increasing utilisation in the first quarter – perhaps reflecting, respectively, bad weather and poor economic growth. (It was common to hear at Bauma that Germany’s rental sector had been impacted by colder than usual weather in the first three months of the year.)

Nowhere is caution over investment levels more evident than among multinational companies, where just 10% said they would increase investment levels by more than 10% this year. In truth, many of Europe’s multinational renters will do well to maintain last year’s investment levels.

That caution looks like it will continue into 2014, with just 30% of multinational respondents expecting significant CapEx increases next year – only German companies were less likely to increase spending next year.

There was insufficient data from the Nordic region, Spain and the Netherlands to provide meaningful results.

The full results of the survey will be published in the June issue of IRN.

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