[...] Six in 10 European small businesses only use a single bank and most are yet to start preparing for the financial upheaval of Brexit, according to the report by Boston Consulting Group and Clifford Chance for the Association for Financial Markets in Europe (AFME).

 

Its research finds that UK-based lenders would face €15bn in restructuring expenses and as much as €40bn of extra tier one capital requirements if Britain left the EU without a deal to give financial groups mutual access in the UK and in the remaining members of the bloc.

 

Many even relatively small companies on the European mainland have relationships with UK-based banks to finance their exports to Britain. The report concludes that the extra costs are likely to lead such banks to reduce the amount of loans and financial market products they provide to European companies, constraining overall funding capacity.

 

“The whole Brexit exercise is going to fragment banking, that is clear,” said Rick Watson, head of capital markets at AFME. “They will have to decide if they eat the extra costs or pass them on. The question it raises then is whether there will be fewer banks in Europe. Do they adjust their business or give up and pull out of Europe?”

 

After interviewing 62 chief executives and treasurers and 10 industry associations, the researchers also forecast that small and mid-sized businesses were likely to be hit by the financial fallout from Brexit much harder than large companies, with significant consequences for the region’s economy as a whole.

 

“If a small business can’t get a simple derivative or cross-border loan to finance its exports or it becomes prohibitively expensive to do then that will hit cross-border trade,” Mr Watson said. [...]