The Bank of England has warned that increased trade levies could lead to more corporate bankruptcies and financial losses for banks. The financial policy committee noted that higher tariffs would exacerbate existing vulnerabilities and raise risks to global growth and inflation. Although UK businesses show resilience, particularly those with stable net debt levels, vulnerabilities remain, notably among firms in manufacturing and retail. An escalation in tariffs could diminish global demand, raise supply costs, and reduce borrowing options as lenders become more cautious.
The Bank of England warned that a hike in trade levies could compound existing vulnerabilities, risking a fresh wave of company bankruptcies and financial losses for banks.
The Bank's financial policy committee highlighted that the potential for much higher trade tariffs increases the likelihood of corporate defaults, especially among sectors with large debt.
UK businesses appear resilient overall, but particular firms in manufacturing and retail could face significant vulnerabilities due to potential tariff increases.
Despite a trade deal between the UK and US, escalating trade tensions could negatively impact UK corporates through reduced global demand and increased supply costs.
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