The post-referendum landscape for shipping finance

The post-referendum landscape for shipping finance

Stephen Marais, partner at Holman Fenwick Willan, considers the possible implications Brexit could have on the shipping finance markets.

Has the UK’s vote in favour of Brexit had any immediate impact on the shipping finance markets?

There is a lot of talk in terms of what may happen in the future, but until article 50 is triggered all the laws stay the same, none of the banks have moved so Brexit itself, in terms of what it is, hasn’t made an impact yet. However, where it has made a change is to do with uncertainty and the market sentiment as a whole. Shipping finance is a very capital intensive business so credit committees in banks and other financial institutions are looking very carefully at their lending decisions and deciding whether to lend money or not.

What do you think will be the long term effects on such markets?

I think with a lot of this it’s very important to differentiate between Brexit and trends within the shipping finance market as a whole.

Shipping is very much a dollar based international business and there has already been a trend, independent of Brexit, towards more dollar based institutions providing finance as they have an in-built competitive advantage over other financial institutions. For example, if you look at a dollar based loan to a Chinese shipping company then it’s not going to have an impact.

What hasn’t helped though are the currency fluctuations because charter rentals and everything that underpins shipping tends to be dollar based and so if you are a European shipping company or you are looking to hedge your currency exposure in sterling or euro then the fluctuations don’t help in terms of economic decision making or planning.

European-focused business will certainly be affected longer term and I think that one of the trends that we are seeing is where banks and institutions are under pressure to finance and support their local industry and businesses. This has happened in the UK where banks such as RBS, Lloyds and Bank of Scotland were told to focus on core banking, and shipping was categorised as non-core because there isn’t a major shipbuilding industry in this country employing tens of thousands of people. So they have already reduced their shi

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About the author:

Meet Neil:

1. Banking and finance lawyer with particular experience in asset finance

2. Likes Wales, wine, sport and anything else that means he doesn’t have the time to have to write personal information about himself

3. Thinks the law is a far broader topic than any of his family and friends who do not work in law

Neil specialises in banking and asset finance transactions with a particular emphasis in finance for shipping, aviation and renewable energy, as well as providing corporate transactional support. He trained and qualified at TLT LLP and spent a further four years working as a finance solicitor, acting for borrowers and lenders before joining the Asset Finance team at DLA Piper (UK) LLP.