Confidence levels hold in Europe’s rental market

Europe's rental market continues to be ‘twin-track' in terms of business confidence according to the IRN/ERA RentalTracker survey for the first quarter of 2011, with the Nordic countries, France and Germany remaining confident but the UK/Ireland, Benelux, Italy and Spain far less so.

Overall, the 180 respondents to the survey painted a stable, slowly recovering rental picture. There was a small increase in the balance of opinion on ‘business conditions now', up from +38% in the final quarter of 2010 to +41.2% in the first quarter. (This positive balance measures the difference in the proportions of companies seeing either an ‘improvement' or ‘deterioration' in conditions).

More than 56% of respondents reported improving conditions at the end of the first quarter, up from 54%.

There was a similar marginal improvement in business levels in the first quarter of this year compared to the same quarter in 2010. Some 61% of respondents reported higher business levels year-on-year - which is almost identical to the previous quarter - and just 12.5% were seeing lower levels of activity, compared to 16.5% in the final quarter of 2010.

This shows that the surge in year-on-year revenue increases experienced in the first two quarters of 2010 - when the market was comparing against the very low activity levels in early 2009 - has steadied to a much more moderate level of year-on-year increases.

Likewise there are moderate improvements in time utilisation trends. At the end of the first quarter, 56.5% were reporting improving utilisation, compared to 53% in the final quarter of 2010, and the positive balance of opinion here has increased from +38.3% in Q4 2010 to +44.6% in the first quarter of this year.

Employment trends mirror this cautious pattern. Although there was a slight decrease in the proportion expecting to employ more people in the next quarter - down from 41% to 38.5% - a clear majority, 55.6%, will make no changes to their staffing levels.

An encouraging sign is that just 5.9% said they will reduce their employment in the second quarter of this year, which is the lowest proportion since we starting measuring employment intentions in the second quarter of 2010.

The split in confidence levels between different countries is revealed in several indices. Those countries where the highest proportion reported growth year-on-year were Germany (85%), Nordic Region (85%) and France (75%). Next come UK/Ireland and Benelux on 50-60% and then Italy and Spain both under 40%.

An almost identical pattern is seen in utilisation rates. In terms of fleet investment this year, it is multinational and French companies who are most likely to increase investment by over 25%. In both cases over a quarter of respondents said they would boost spending by at least 25%.

Beyond these general findings, there are individual examples of encouraging news. Italy, although still near the bottom of the confidence table, was reporting significant improvements compared to the fourth quarter of 2010 (balance of opinion on ‘business conditions now' shifted from the negative, -15%, to the positive, +12%) and the proportion seeing increasing utilisation almost doubled to 36%.

The UK rental market saw remarkably similar results to the survey in the fourth quarter of 2010. The market seems to be holding its breath to see the impact of government spending cuts that are being implemented now.

Finally, thank you to all those companies and individuals who responded to the survey. The full results, plus graphical analysis, will be presented in the May issue of IRN.