Leasing to boost green tech investment

THE NEW scheme will give businesses greater opportunities to use leasing to improve their green credentials, including optimising asset efficiency to grow revenue.

BNP Paribas’ Sarisher Mann, said: “Environmental Social Governance is fast becoming a crucial lever in the way global businesses are run. In 2012, the Green Finance market was valued at around $5 billion and today it is over $540 billion. To accelerate this evolution, BNP Paribas has created a wide range of tangible solutions to help clients in their transition towards net zero. This includes targeting renewable energy, circular economy approaches, green buildings and mobility.”

Talking about the current economic climate at the BNP Paribas Leasing Solutions Partner Economic Forum, BNP Paribas’ chief European economist, Paul Hollingsworth, added: “Following the pandemic, the impacts of Brexit and now the Russia-Ukraine conflict, the shocks to the economy and the subsequent impact on inflation are becoming impossible to ignore. This is causing a squeeze on consumer incomes, and we expect to see this continue in the short-term.

“My takeaway is that it looks like we may be heading towards a stagflation environment, but I’m not sure we’re there yet. I don’t think the shock we’re seeing at the moment, is going to be a full-blown recession.”

Writing in a blog on the BNP Paribas website Andy Milsom, head of partner training & development at BNP Paribas Leasing Solutions elaborated that ‘the UK Economy is moving toward a period of increased turbulence which will undoubtedly impact on the business environment’.

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Supply chain shortages combined with inflation, rising interest rates and an impending increase in businesses taxes will complicate the requirement by businesses to invest in new equipment. However, the use of leasing as a means of acquiring new technology can offset some of the obvious difficulties we currently face and businesses do not defer much needed investment.”

Driven, among over things, by a huge increase in the cost of fuel and supply chain shortages, prices in the UK are now rising at their fastest rate for many years. The latest Consumer Price Index (CPI) inflation rate which ended in December 2021, as measured by the Office for National Statistics, stood at 5.1%, with predictions from The Bank of England that this rate will rise to above 7% by April 2022. Inflation is a new headache for business leaders.

Milsom added: “There are two reasons why taking out a leasing agreement during a period of high inflation makes sense for businesses. As prices rise rapidly, it is important to strike a deal as soon as a solution is available, any delays will incur additional expense. Leasing provides immediate access to the means of acquisition without the need for a large cash outlay, which would be necessary for outright purchase or the time-consuming process of setting up a banking credit line.

Leasing is a fixed price contract, which means rental payments negotiated today will remain the same throughout the term of an agreement. The effect of inflation is to reduce the value of money over time, which means that in real terms rental payments negotiated today will be reduced at a rate. This corresponds to the underlying rate of inflation. In other words, the lease will become cheaper over time even though the rental payments remain the same.”

Rental payments on hire agreements are normally treated as a business expense for tax purposes, this means that the cost of a leasing agreement can be deducted from pre-tax profits. Corporation Tax is scheduled to rise from 19% to 25% from 1 April 2023 on annual profits above £200,000.

Andy added: “Rental payments on any leasing agreement signed in 2022 will, in real terms, reduce by 6% from 1 April 2023 for any company facing a corporation tax increase from 19% to 25%.”

For more information, visit leasingsolutions.bnpparibas.co.uk