UK & European Leasing & Asset           Finance Market Overview 
                                                                            

Executive Summary

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UK and European leasing markets remain resilient into early 2026. UK asset finance entered the year with stabilising but uneven growth, supported by continued SME demand despite tougher macro conditions. Across Europe, portfolios remain broadly steady, though the rate environment has shifted again as markets now price in potential ECB hikes through 2026. The UK’s confirmed pay‑per‑mile EV charging regime -effective from April 2028 - continues to reshape EV economics, fleet planning and residual value assumptions. Consolidation, notably BPCE’s integration of SGEF, is redefining scale and competitive dynamics across the continent.

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United Kingdom Overview

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Market size and recent flows. FLA data shows January 2026 new business fell 6% year‑on‑year, though 12‑month rolling volumes to January 2026 were still 1% higher than the prior period. SME lending remained a bright spot, up 3% year‑on‑year, while lending to larger businesses fell sharply (‑19%). Plant & machinery and business equipment finance continued to grow (up 13% and 2% respectively), while commercial vehicles saw a 15% decline, reinforcing the divergence across asset classes. 

Asset class performance. The late‑2025 pattern persists: business new‑car finance and plant & machinery remain strong, while commercial vehicle finance is subdued. This divergence continues to influence origination mix, pricing discipline and residual value modelling into 2026.

Motoring tax reform and EV economics. The UK Government has confirmed a pay‑per‑mile EV tax (eVED) from April 2028, charging 3p per mile for EVs and 1.5p for plug‑in hybrids. The OBR forecasts the measure could reduce EV sales by up to 440,000 between 2026–2030, though expanded grants and incentives may offset part of this. Average EV drivers (7,400–8,900 miles/year) face £220-267 annual cost, materially altering TCO and fleet replacement timing. Consultation on scheme design closed in March 2026, with driver groups warning of policy uncertainty dampening EV appetite.

Implications for lessors and fleets. Lessors are re‑running TCO and RV scenarios to incorporate mileage‑based taxation and updated VED rules. Pricing for long‑term EV contracts is being recalibrated to reflect higher running‑cost sensitivity and uncertain secondary‑market depth. Lifecycle services - maintenance, refurbishment, remarketing - are expanding as margin‑protection levers.

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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 2024–25 portfolios broadly stable and growth pockets in CEE and Southern Europe.

Macro and rates. The ECB deposit facility rate remains at 2.00% (as of March 2026), but markets now price a 64% probability of a hike to 2.25% in April 2026, with further increases possible in June and July.

Banks including JPMorgan, Morgan Stanley and Barclays now forecast up to three 25bp hikes in 2026, reversing earlier expectations of a hold. This keeps funding‑cost sensitivity high for lessors and pressures pricing models.

Strategic consolidation. BPCE’s acquisition of SGEF, completing in early 2025, is now deep into integration. The deal positions BPCE as a European leader in equipment leasing, expanding its footprint across 25 countries and reshaping vendor‑partner alignments through 2026.

Product and sustainability trends. ESG mandates and circular‑economy policies continue to accelerate green leasing, refurbishment/refinance models and usage‑based contracts. Digital platforms are enabling subscription‑based and lifecycle‑centric offerings, supporting customer demand for flexibility.

What This Means for Portfolios, Pricing and Capital. Residual value risk. RV risk on EV exposures is elevated, with the UK’s mileage‑based tax adding uncertainty around used‑EV demand, mileage profiles and secondary‑market pricing. Stress‑testing across mileage, charge pass‑through and market depth is now essential.

Pricing and underwriting adjustments. While ECB cuts in 2025 lowered funding costs, the 2026 rate‑hike outlook requires recalibration of spreads and tighter underwriting on long‑tail residual risk.

Lifecycle services are increasingly being priced into contracts to stabilise returns.

Capital and funding strategy. Consolidation - particularly BPCE/SGEF - is reshaping funding footprints, scale economics and counterparty concentration. Investors should reassess funding diversification, ABS timing and exposure to banks navigating Basel IV/CRD VI constraints.