5th July 2016
The Bank of England has warned that Brexit risks to commercial property and domestic companies are beginning to crystallise.
Bank of England governor Mark Carney cited growing evidence that firms are delaying investment decisions and the UK’s current account deficit as major problems. He noted that the more domestically focused FTSE 250 was a better barometer of investors’ economic expectations than the globally exposed FTSE 100.
The 6 monthly financial stability report from the Bank’s Financial Policy Committee said: “There is evidence that some risks have begun to crystallise. The current outlook for UK financial stability is challenging.”
To help ease pressure on the financial system it has eased special capital requirements for bank.
Carney said: “This is a major change. It means that three-quarters of UK banks, accounting for 90% of the stock of UK lending, will immediately – immediately – have greater flexibility to supply credit to UK households and firms.”
The report foresaw risks in the commercial property market, with foreign inflows falling by 50% in the first three months of 2016.
The bank is also concerned a about “the high level of UK household indebtedness [and] the vulnerability to higher unemployment and borrowing costs.”
House prices could also come under pressure, particularly if buy-to-let investors abandon the market, it said.