The Growth of Leasing in the UK

Abstract

Although the rapid growth in equipment leasing experienced in the UK during the 1970s and early 1980s is a relatively recent phenomenon, the use of leasing to finance the aquisition of capital assets has its immediate origins in the nineteenth century. Clark has identified the growth of the railway system as the principal instrument in developing leasing as a source of industrial finance.¹ A shortage of capital to finance the purchase of railway wagons arose by the mid nineteenth century as a result of the expansion in industrialisation, particularly the demand for coal, and the replacement of other forms of transport by the railways. In response railway wagon leasing companies were formed. Interestingly, one such company, The North Central Wagon Company, which in 1971 merged with Lombard Banking to form Lombard North Central, has survived to the present day. Despite the fact that leasing was largely replaced by hire purchase type agreements in the latter part of the nineteenth century, the financing of railway wagons through leasing was an important formative influence on future patterns of business finance in the UK.