Significant potential credit risk if EU workers’ rights are not protected post Brexit

In case you missed it in The Times and The Mail on Sunday, 4most have reported that there could be a potentially substantial credit risk to UK lenders should the UK government fail to reach an agreement on the status of EU nationals. Analysis of figures from the Office of National Statistics (ONS), and on the assumption that EU nationals have accumulated unsecured debt in line with the national average, 4most has estimated that the total cost should loans remain unpaid in the event of a sudden and disruptive repatriation could amount to around £4.97bn.

There has been a precedent for this, with the UAE suffering a significant credit loss following its expulsion of Lebanese nationals in 2015.

A forced repatriation could also have a significant impact on demand in the rental market, and in turn those landlords whose mortgages depend on that demand. Based on the estimate of 3.159m EU nationals living in the UK people at end 2015, and on the assumption that households comprised of those with EU nationality are of a similar composition to those in the UK as a whole, a potential 1.330m households would be affected – 4.9% of all households in the UK. This does not take into account mixed households, with EU and UK citizens cohabiting, meaning that the potential impact could be higher than estimated.

The figure estimated by the 4most reinforces the potentially substantial impact on the lending sector should adequate preparations not be put in place prior to the UK leaving the EU.