Barclays UK predicts potential post-Brexit ‘recession’

A UK banking company has outlined the UK’s departure from the EU as a primary risk to its business.

Barclays UK, which today announced its financial results for 2019, cautioned that Brexit could result in a recession.

The London-based company’s performance for the year was favourable, seeing a profit before tax of £669m and total income of £7,322m, despite operating costs of £5,944m.

In the report, it outlined key risks in the coming year, including the UK’s withdrawal from the European Union.

It commented: “The UK’s future relationship with the EU and its trading relationships with the rest of the world could take a number of years to resolve.

“This may lead to a prolonged period of uncertainty, unstable economic conditions and market volatility, including fluctuations in interest rates and foreign exchange rates.”

It added that while the exact impact of Brexit is unknown, it’s monitoring potential risks, including a UK recession, which would see higher unemployment and a financial dip across the country.

It speculated: “Credit spreads could widen leading to reduced investor appetite for the Barclays Bank UK group’s debt securities. This could negatively impact the Barclays Bank UK group’s cost of and/or access to funding.

“A credit rating agency downgrade applied directly to the Barclays Bank UK group, or indirectly as a result of a credit rating agency downgrade to the UK Government, could significantly increase the Barclays Bank UK group’s cost of and/or reduce its access to funding, widen credit spreads and materially adversely affect the Barclays Bank UK group’s interest margins and liquidity position.”

“A UK recession with lower growth, higher unemployment and falling UK property prices could lead to increased impairments in relation to a number of the Barclays Bank UK group’s portfolios, including, but not limited to, its UK mortgage portfolio, UK unsecured lending portfolio (including credit cards), commercial real estate exposures, and its ESHLA portfolio.”

“The ability to attract, or prevent the departure of, qualified and skilled employees may be impacted by the UK’s and the EU’s future approach to the EU freedom of movement and immigration from the EU countries and this may impact the Barclays Bank UK group’s access to the EU talent pool.”

The company stated that it plans to monitor these risks closely.