Britain’s financial stability following the Brexit referendum “remains challenging” and the likelihood of risks “remains elevated”, the Bank of England has said in its Financial Stability Report.
According to the report, “It will take time to clarify the United Kingdom’s new relationships with the European Union and the rest of the world as well as for the UK economy to adjust to these changes. The orderliness of the adjustment will influence the risk to financial stability.”
The Bank also highlighted dangers top the financial services sector. It said: “Changes to the trading relationship between the United Kingdom and the European Union may require firms to alter their operations and the services they provide.
“If any such adjustments take place in a short timeframe, there could be a greater risk of disruption to services provided to the European real economy, which could spill back to the UK economy through trade and financial linkages.”
The report added that Donald Trump’s victory had “reinforced existing vulnerabilities”.
Despite the fall in sterling, a reduction in commercial property prices and indications of reduced investment into the UK, the Bank said economic activity and business sentiment have recovered from “low points” immediately after the referendum and are “materially stronger than had been expected in July”.