ERA/IRN RentalTracker Q1 results: rental waits for better times

The ERA/IRN RentalTracker for the first quarter of 2023 shows the region’s rental companies in a kind of holding pattern, hoping for better things to come. Murray Pollok reports.

At the end of March 2023, Europe’s rental companies seems to be almost in waiting mode, with the worst of the Ukraine energy impact behind them and the prospect of an easing of inflationary pressures, but still in the midst of a low growth economic environment.

Rental business conditions in Europe, asked in late March 2023. (Graph: IRN) Rental business conditions in Europe, asked in late March 2023. (Graph: IRN)

It is possible that a rental survey in Europe at this point would be the most downbeat of any in the world, given that the IMF is forecasting that the Euro zone will see growth of just 0.6% this year, the lowest by some margin of any region worldwide.

Asked about ‘business conditions now’ at the end of March 2023, more then 90 companies in Europe managed to maintain a positive balance of opinion of +17.6%, with 34% positive, 16% negative and almost 50% seeing no change. That means two thirds of the respondents were either seeing no change or worsening conditions.

Still, the picture remains net positive and a slight improvement on sentiment at the end of December last year.

The ERA/IRN RentalTracker survey is conducted jointly by International Rental News (IRN) magazine and the European Rental Association (ERA).

Rental business expectations one year ahead, asked in late March 2023. (Graph: IRN) Rental business expectations one year ahead, asked in late March 2023. (Graph: IRN)

In terms of business levels in the first quarter of this year compared to Q1 2022, there was a positive balance of +38%, with 53% seeing higher levels of business, 15% lower, and 31% the same.

That’s very similar to the year-on-year comparator for Q4 2022, but a lot lower than the post-pandemic period when comparison periods were distorted by the Covid slowdown. It again points to a continued recovery from that difficult period and evidence of a continuing bounce back.

Utilisation trends
Other key business confidence measures for rental – time utilisation rates and employment intentions – also remained positive, but softening.

With fleet utilisation, there was a net positive balance of option of +20% (the difference between the 38% reporting improvements and the 18% seeing a deterioration). That +20% looks like a good figure, except that it is the lowest since the height of the pandemic in early 2020 and less than half the figure of the three surveys in 2022.

There is a slight weakening in employment intentions, but rental companies in Europe remain keen to employ more people. Almost 50% of respondents said they would recruit more in the second quarter of this year against the 5% who said they would employ fewer staff.

Rental fleet investment for 2023, as asked in March 2023. (Graphic: IRN) Rental fleet investment for 2023, as asked in March 2023. (Graphic: IRN)

This metric has remained high over the past two years – post the worst of the pandemic – and reflects the wider problems that companies are having to recruit and retain staff.

Spending on fleet
What about fleet investment intentions. Again, this data is complicated by supply chains issues which have ‘choked back’ supply and perhaps maintained investment levels at historically good levels even as economies have weakened.

There was a +13% positive balance of opinion on whether spending this year would be higher or lower than 2022. Some 29% said they would spend more this year, 16% said less, and the majority, 54%, said investment would be maintained at the same level.

That +13% positive balance compares to figures around the +50% mark throughout 2022, which means that companies last year were forecasting higher spending levels for 2023 than are now actually being planned.

For spending intentions in 2024 – although it is a bit early to be clear on that – the positive balance rises to +34%. Only 7% of respondents were forecasting that their spending next year would be lower.

Rental company employment intentions for Q2 2023. (Graph: IRN) Rental company employment intentions for Q2 2023. (Graph: IRN)

That ‘wait for next year’ sentiment is backed up by the responses to the question ‘how will things be in 12 months’ time?’ Here, the positive balance of opinion rose to 39%, the highest since Q1 2022. Only 14% were expecting worse conditions by March 2024, with 53% expecting better to come and 32% anticipating no major change.

National differences
Looking at national differences, there seems to be a rather stark difference between Spain and the UK – which are near the top of many of the metrics – and France and Italy, which are near the bottom.

It is worth remembering that sample sized for individual countries is rather low, so the findings are definitely in the category of ‘anecdotal’ rather than ‘scientific’. There were insufficient results, for example, to allow us to report meaningfully on the Benelux, Germany or Nordics.

Remarkably, France is at the bottom of every metric that we track. Not a single French company was reporting improving conditions in late March 2023, or seeing utilisation improve, or forecasting higher spending this year. The survey period coincided with social unrest about pension reforms and industrial strikes, so that is bound to have had an impact on business sentiment.

Fleet time utilisation trends, as measured in late march 2023. (Graph: IRN) Fleet time utilisation trends in Europe, as measured in late march 2023. (Graph: IRN)

The UK is in a different position and much more positive, relatively speaking, perhaps surprisingly so, given the IMF’s forecast that the UK will have the slowest growth economy in Europe this year (it forecasts a 0.6% contraction).

When reading survey results, one has to remember the starting conditions: business sentiment has been relatively low for some time in the UK, but the prospect of lower inflation and a weaker recession than widely anticipated may have led to a healthier view on business prospects.

It is also worth pointing out that multinationals are similar to France and Italy on the confidence stakes. For these bigger companies, there is no hiding from an overall weaker economic environment.

The Q1 survey is therefore revealing not of any dramatic changes that are underway, but of the curious position facing the European rental industry: simultaneously, an easing of certain pressures alongside generally weak economies.

Note: The survey was conducted in the final two weeks of March 2023, with almost 100 rental companies in Europe taking part. IRN would like to thank the rental associations in Europe, including ERA, DLR, ASEAMAC and Assodimi, for their help in distributing the survey. For more information on the survey, contact Lewis Tyler, Deputy Editor, IRN (lewis.tyler@khl.com).

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