CONTRACT hire and leasing companies must innovate and adapt to 'counter hostile waters' in the fleet industry, British Vehicle Rental and Leasing Association director general Norman Donkin said at the Fleet Show launch of the organisation's 'Industry Review 2000'. Falling residual values coupled with strong competition which has kept rental rates down, have contributed to undermine the profitability of Britain's short and long-term rental companies, although their combined fleets have topped the two-million vehicle mark for the first time.

Those are some of the key conclusions of the review, which surveyed the organisation's 778 members which operate 300,000 short-term rental vehicles with the remainder on long-term contracts and fleet management. In launching the report, Donkin said: 'There has been no decline in contract hire despite claims of substituting cars with cars. Members have a number of challenges ahead - competition, cost pressures and residual values, plus new car pricing.'