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Most British companies would withstand sharply higher tariffs even if their earnings fell 10 per cent and their borrowing costs surged, according to the Bank of England’s assessment of risks from US President Donald Trump’s trade war.
“Despite some pockets of vulnerability, UK corporates would, in aggregate, be able to service their debts even in the face of further global shocks such as lower global demand and supply,” the BoE said in its latest financial stability report published on Wednesday.
UK companies that are more exposed to the risk of a trade shock account for about 60 per cent of jobs in the country but only 30 per cent of corporate debt, which the central bank said showed they typically have borrowed less than other companies.
“The outlook for UK household and corporate resilience remains strong in aggregate, and it would take significant macroeconomic shocks for aggregate debt servicing measures to deteriorate materially,” it said.
However, officials warned that some heavily indebted British companies reliant on market-based finance “are particularly exposed to global shocks”. They estimated that 10 per cent of market-based corporate debt would need refinancing in the next year.
This is a developing story
