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The Bank of England is investigating how UK businesses would be affected by the reversal of a long-running private equity boom, officials said, as they stepped up warnings about leverage, transparency and valuations.
The BoE’s financial policy committee, which monitors risks to financial stability and develops policies to offset them, said: “Finance for riskier companies could be particularly vulnerable to a significant deterioration in investors’ risk appetite.”
He said the likelihood of a “sharp correction” in some markets had increased since December as prices rose despite the unclear outlook.
Officials added that they will examine relationships between private equity firms, which face higher funding costs, and British companies that rely on them for funding. The BoE will update on the work in June.
This is a developing story