UK firms face higher debt financing costs on Brexit
British companies with over £102bn (€116bn) of debt to refinance this year are facing rising funding costs as a no-deal Brexit looms, with yields on some bonds now akin to those in emerging markets.
Car maker Jaguar Land Rover highlighted the issues facing some UK corporates when it said recently it would not tap bond markets for the $1bn (€884m) it needs to repay maturing debt as it plans alternative funding.
“Market conditions for issuing bonds presently are less favourable in general and with our bonds trading below par reflecting our recent financial performance,” said Jaguar Land Rover treasurer Ben Birgbauer.
“Brexit uncertainty is clearly a contributing factor to the present weak market conditions,” he said.
Fitch Ratings put Jaguar Land Rover under review for possible downgrade on February 5, citing Brexit risks.
British companies sold just $478m equivalent of bonds in January, Refinitiv data shows, down from $2.35bn a year ago and marking the slowest start to the year in a decade.
That partly reflects a lacklustre outlook for the global economy.
Brexit risks are an additional complication for British firms, whose net debt is at a record high, according to consultancy Link Asset Services.
Many could find it challenging — and expensive — to roll over maturing debt, especially if Britain leaves the EU without a transition period in place to minimise economic disruption.
Meanwhile, British property surveyors are the most downbeat about the short-term outlook for house prices in nearly eight years, and sellers are shying away from putting homes on the market in the run-up to Brexit, according to a survey by the Royal Institution for Chartered Surveyors.
