How important leasing is for the economy

Leasing is an important financing option for companies. A study by BAK Basel and the FHNW School of Business shows that the Swiss leasing industry directly and indirectly triggered gross value added of CHF 800 million in 2015. The employment effect is 5,000 jobs. More significant are the additional investments made possible by leasing. In 2015, these investments were associated with a gross value added of CHF 5.3 billion and around 41,000 jobs. Leasing will become even more important in Industry 4.0. In a digitalized economy, where payment is made for use rather than ownership, leasing is the ideal form of financing. Scenario calculations show considerable potential: if Swiss companies were to lease at the level of comparable European countries, additional growth of CHF 6.5 billion could be realized within 10 years. CHF could be realized within 10 years. This corresponds to about one percent of today's gross domestic product. The study shows that leasing is more than just a form of financing: Leasing not only enables investment, but also facilitates the upcoming structural change and helps to better exploit the growth potential associated with the digital transformation.

The Swiss Leasing Industry

The Swiss leasing market amounted to approximately CHF 12 billion in 2015. CHF (new business). This represents a gross value added of CHF 490 million and around 2,700 jobs (FTE). If indirect effects are included, the result is a gross value added of around CHF 800 million and around 5,200 jobs. The economic impulse of leasing is even stronger, i.e. the consumer spending and investments financed with leasing. This results in a gross value added of 5.3 billion CHF. CHF, associated with around 41,000 jobs.

Less in demand as a financing instrument than in other countries

Leasing preserves liquidity, helps optimize the capital structure, can reduce the cost of capital and simplifies cash management. The company survey conducted as part of the study shows that most companies in Switzerland are aware of these advantages. Nevertheless, this form of financing is used less by Swiss companies than by their competitors in other European countries. In 2015, only 6.5 percent of total corporate investments were financed with leasing. The study reveals the reasons for this: Swiss companies primarily finance their investments with their own funds, balance sheet policy and tax arguments are less compelling, but less favorable legal conditions (in other countries, ownership of the leased asset can be secured more easily) or cultural reasons (preference for legal ownership) also have a negative impact on the use of this financing instrument.

More than a form of financing

Leasing allows greater participation in innovation cycles, frees up financial resources for research and development, and strengthens the competitiveness of industrial companies in the form of vendor leasing. This creates financial scope that can be used for investment and growth. There is much to suggest that these effects will play an even greater role in the future.

Key role in the transformation of traditional business models

In "Industry 4.0", companies organize and control their value chain over the entire life cycle of the products. This calls for integrated solutions from manufacturers, IT infrastructure that is always up to date, and remuneration systems adapted to the revenue model. Leasing plays a key role in the transformation of traditional business models. With the tendency not to own an asset but to pay for a solution, flexible forms of financing tailored to the business model will gain in importance. Leasing is then not just a way of financing the business, but will become an integral part of it.

Model simulations show that, under plausible assumptions, an increased use of leasing can lead to a noticeable increase in economic growth and prosperity. Provided that the use of leasing can be raised to the level in relevant international comparator countries (D, F, NL, UK) and that this is largely associated with an expansion of investment and innovation activity (low substitution effects), an overall (cumulative) increase in GDP of CHF 6.5 billion is possible over the next 10 years. CHF is possible. This corresponds to about one percent of today's gross domestic product. The productivity effects do not lead to a decline in employment in the model simulations.

Source: University of Applied Sciences Northwestern Switzerland