UK & European Leasing & Asset           Finance Market Overview 
                                                                            

Executive Summary

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​UK and European leasing markets remain resilient through June 2026, though momentum is increasingly shaped by rate volatility, policy uncertainty, and divergent asset‑class performance. UK asset finance demand has stabilised after a soft Q1, with SME appetite holding up despite tighter underwriting. Across Europe, portfolios remain broadly steady, but the macro backdrop has shifted again: markets now price multiple ECB rate hikes through mid‑2026, reversing the easing narrative that dominated late 2025. The UK’s confirmed pay‑per‑mile EV taxation regime (from April 2028) continues to reshape EV TCO, fleet renewal cycles and RV assumptions. Meanwhile, consolidation - most notably BPCE’s integration of SGEF - continues to redefine scale, vendor partnerships and competitive dynamics across the continent.

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​United Kingdom Overview

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Market Size and Recent Flows. FLA data through early 2026 shows a mixed picture:

January 2026 new business down 6% YoY, though 12‑month rolling volumes to January remained 1% higher than the prior period. SME lending remained the strongest segment (+3% YoY), while lending to larger corporates fell sharply (-19%). Plant & machinery (+13%) and business equipment (+2%) continued to expand, while commercial vehicles (-15%) remained weak. This reinforces a multi‑speed asset‑class landscape heading into mid‑2026.

Asset Class Performance. The late‑2025 pattern persists into mid‑2026: Business new‑car finance and plant & machinery remain robust. Commercial vehicle finance remains subdued, reflecting weaker logistics demand, higher operating costs and delayed fleet replacement cycles. This divergence continues to influence origination mix, pricing discipline, and RV modelling.

Motoring Tax Reform and EV Economics. Mileage‑Based EV Taxation (eVED). The UK Government has confirmed the eVED regime from April 2028: 3p per mile for battery EVs. 1.5p per mile for plug‑in hybrids. The OBR estimates the policy could reduce EV sales by up to 440,000 units between 2026-2030, though expanded grants and targeted incentives may soften the impact. TCO Impact: Average EV drivers (7,400–8,900 miles/year) face £220–£267 in annual mileage‑based charges, materially shifting TCO and influencing: Fleet renewal timing. Contract duration preferences. Salary‑sacrifice attractiveness.

Policy Uncertainty. Consultation on scheme design closed in March 2026. Driver groups and fleet operators warn that uncertainty around exemptions, enforcement, and indexation is dampening near‑term EV appetite.

Implications for Lessors and Fleets. Lessors are actively recalibrating: TCO and RV models to incorporate mileage‑based taxation, updated VED rules and evolving used‑EV market depth. Pricing for long‑term EV contracts, reflecting higher running‑cost sensitivity and uncertain secondary‑market liquidity. Lifecycle services - maintenance, refurbishment, battery diagnostics, remarketing - as margin‑protection levers. Usage‑based pricing and flexible mileage bands to manage volatility.

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​​European Market Overview

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Top-Tier Portfolio Size. The AFE50 reported €349bn of lease receivables for 2024, with portfolios through 2024-25 broadly stable. Growth pockets remain in CEE and Southern Europe, supported by SME investment and EU‑funded programmes.

Macro and Rates. As of March-June 2026: The ECB deposit facility rate remains at 2.00%. Markets price a 64% probability of a hike to 2.25% in April 2026, with further increases possible in June and July. Major banks (JPMorgan, Morgan Stanley, Barclays) forecast up to three 25bp hikes in 2026, reversing earlier expectations of a prolonged hold.

This keeps funding‑cost sensitivity high, pressuring pricing models and tightening underwriting standards.

Strategic Consolidation. BPCE’s acquisition of SGEF, completed in early 2025, is now deep into integration. The combined platform strengthens BPCE’s position as a European leader in equipment leasing, with expanded reach across 25 countries. Vendor realignments and product harmonisation continue to reshape competitive dynamics through 2026.

Product & Sustainability Trends. ESG mandates and circular‑economy policies continue to accelerate: Green leasing, Refurbishment/refinance models. Usage‑based and subscription contracts. Digital lifecycle‑centric platforms enabling flexible. Lower‑upfront‑cost offerings

What This Means for Portfolios, Pricing and Capital. Residual Value Risk. RV risk on EV exposures remains elevated. The UK’s mileage‑based tax adds uncertainty around:

Used‑EV demand. Mileage profiles. Secondary‑market pricing. Stress‑testing across mileage, charge pass‑through and market‑depth scenarios is now essential.

Pricing & Underwriting Adjustments. While ECB cuts in 2025 temporarily eased funding costs, the 2026 rate‑hike outlook requires: Recalibration of spreads. Tighter underwriting on long‑tail RV risk. Greater emphasis on lifecycle services to stabilise returns. Increased use of variable‑rate structures and shorter contract tenors.

Capital and Funding Strategy. Consolidation - particularly BPCE/SGEF - is reshaping:

Funding footprints. Scale economics. Counterparty concentration. Investors should reassess:

Funding diversification. ABS timing. Exposure to banks navigating Basel IV / CRD VI constraints. Demand for private credit and alternative funding channels continues to rise as banks rebalance capital allocation.