Lenders search for entrepreneurs most exposed to no deal

BANKS are examining small business accounts to spot those most at risk from a no-deal Brexit as entrepreneurs face the threat of a squeeze on credit.

Lenders have relaunched no-deal preparations with new assessments to pinpoint the riskiest parts of the economy, according to KPMG and EY. The accountants have been advising banks on their preparations for a disorderly departure. There is a “renewed focus” in the banking industry as lenders attempt to understand the risks among clients and in supply chains, said Richard Bernau at KPMG.

The banks have continued “filtering through the hundreds of thousands and if not millions of customers” to spot businesses that need support, said Mr Bernau.

Andrew Pilgrim at EY added that nodeal preparation programmes were starting to be ramped up in the banking industry as “the noise has increased very much in line with the political expectations”. Although the Bank of England believes the banking sector is well-prepared, SMES could still find their access to credit dry up in a sudden downturn. Mr Bernau warned that a credit squeeze for businesses is “kind of inevitable”.

The Bank of England has found that 80pc of businesses believe they are prepared for a no-deal Brexit but around one in 10 have no contingency plan and did not expect to develop one. SMES were more likely to have not prepared for a cliff-edge Brexit.

The prospect of dwindling access to credit in a no-deal Brexit comes as company debt rises at a faster pace than economic growth. A PWC report last November revealed that companies have started to accelerate their borrowing since 2015.

It estimated that debt held by nonfinancial companies as a percentage of GDP will rise from 83pc in 2017 to 91pc in 2023.