Confidence across the finance and leasing industry improved during the second quarter despite most firms continuing to expect weaker UK economic conditions, according to the Finance & Leasing Association (FLA).

The proportion of respondents expecting the economy to deteriorate over the next 12 months fell from 81% in the first quarter to 61%.

Meanwhile, 27% now expect economic conditions to improve, up sharply from just 6% three months earlier.

Demand for funding remains resilient, with 63% of respondents expecting their new business volumes to increase over the coming year.

REFINANCING SUPPORTS DEMAND

Replacement cycles, refinancing activity and the continued funding needs of households and businesses were identified as important drivers of future business.

FLA members provided a record £163bn of new finance to UK businesses and households during 2025, supporting investment in vehicles, machinery and equipment alongside consumer spending.

The latest findings suggest firms expect demand to remain robust despite continuing uncertainty around the wider economy.

CREDIT RISKS EASE

Concerns about insolvencies and customer arrears have moderated since the first quarter, although they remain elevated.

Some 79% of respondents expect business insolvencies to rise, down from 87%, while the proportion anticipating higher personal insolvencies fell from 86% to 78%.

Expectations of an increase in customers falling into arrears also declined from 67% to 63%.

The FLA said most respondents forecast only modest increases rather than a significant deterioration in customer finances.

FUNDING COST PRESSURES MODERATE

Two-thirds of firms expect funding availability to remain unchanged over the next year.

The proportion anticipating higher funding costs fell from 78% in the first quarter to 63% in the second.

The survey also found that firms continue to invest in artificial intelligence, automation and digital customer journeys to improve efficiency, customer outcomes and future growth.

Geraldine Kilkelly (main picture, inset), director of research and chief economist at the FLA, said: “While our members remain cautious about the wider economic outlook, it is encouraging that confidence has improved since the start of the year and that they see the potential for new business growth over the next 12 months.

“Periods of uncertainty often accelerate change, and our latest survey suggests that many members are using the current environment to invest in technology, strengthen operational resilience and refine their approach to risk management.

“The pace of investment in AI, automation and digital processes shows that members are focused not just on navigating near-term challenges, but on improving productivity, customer outcomes and competitiveness over the longer term.”