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UK banks point to weaker restructuring activity

The majority of British banks have seen a drop in restructuring activity over recent months, new Deloitte data has revealed.

Wednesday 28 January 2015

Almost nine in 10 British banking institutions anticipate weaker restructuring activity in 2015, according to new Deloitte research.

The business advisory firm said 89% of these organisations have predicted lower levels of activity in this area, while 83% saw fewer restructuring cases during 2014.

Key findings

As part of its study, Deloitte asked 80 senior banking professionals for their opinions on the UK and European restructuring markets.

According to the report:

  • Two thirds of UK professionals have seen a rise in the number of exits made through refinancing agreements.
  • More than half of the British survey respondents said they have seen a rise in the number of exits made through business sales, following a recovery in the merger and acquisition market.
  • Around half (51%) of the European banking players reported a drop in restructuring activity during 2014, while 42% believe this year will see flat activity levels.
  • Close to three quarters (71%) of those in the alternative lending sector hope to see a rise in restructuring activity this year, across both the UK and Europe.

What the experts say

According to Nick Edwards, head of restructuring at Deloitte, UK activity could be held back this year due to the recent deleveraging efforts made by banks and improving economic signals.

Greater emphasis is also being placed on retail banking operations, rather than large-scale corporate banking, he said.

But Mr Edwards added: “While the system is relatively robust, there could be future restructuring activity in retail and education, as well as in energy as a knock-on from falling oil prices.”

European picture ‘less certain’

Focusing on the European market, Andrew Grimstone, Deloitte’s head of global restructuring services, said the 2015 forecast is not as settled.

A range of factors could increase restructuring activity on the continent over the coming months, he said, with forbearance rules from the European Central Bank and deleveraging measures likely to have an impact.

Mr Grimstone said businesses could also be vulnerable if they make use of certain high-yield structures but fail to properly get to grips with their underlying operational problems.

The expert concluded: “Other factors creating uncertainty are geopolitical risks, for example tensions in the Ukraine and Russia, or the aftermath of the Greek elections.

“Events in the financial markets can also lead to increased volatility, such as the change in the value of the Swiss Franc ahead of the recently announced quantitative easing.”

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Copyright Press Association 2015 

“Events in the financial markets can also lead to increased volatility, such as the change in the value of the Swiss Franc ahead of the recently announced quantitative easing.”

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