Bank of England Stress Test Flags Leverage Risks in UK Corporate Sector
The Bank of England has conducted a private markets stress test to examine potential vulnerabilities in the UK corporate sector. The exercise, which models a severe five-year shock driven by global recession, geopolitical tensions, and elevated energy prices, found relatively high leverage among UK corporates.
According to preliminary results from the system-wide exploratory scenario (SWES), refinancing risks for 2026-27 remain manageable. However, the exercise highlights potential pockets of vulnerability in the corporate sector as private markets expand their role in financing and supporting investment across the UK.
Morningstar DBRS expects no immediate impact on UK banks' credit ratings since the results are reported only at an aggregate level. The central bank's scenario is designed to assess system-wide resilience, rather than testing individual institutions.