Unis and TfL most exposed public sector entities to Brexit, says Moody's

Universities and Transport for London would be the most at risk of the UK public sector entities if Britain votes to leave the European Union in the upcoming referendum, according to Moody’s.

In a report on Monday, the ratings agency pointed to the loss of EU funding and lower own-source revenues.

"If the UK were to exit the EU, public sector entities in the UK could be affected through lower EU funding or lower central government spending transfers. At the same time, revenues could face pressure from lower economic growth and any immigration curbs. All public sector entities are vulnerable, but to varying degrees," said Jennifer Wong, senior analyst at Moody's.

The agency said an ‘out’ vote would create heightened uncertainty, which in turn would result in slower economic growth over the medium term.

For local authorities and TfL, own-source revenues could be affected by slower growth in business rates income.

Universities could face lower investment income, and, if unemployment rises, higher arrears and lower rental income could weigh on housing associations.

Although some of the lost funding would likely be made up for by the government and other sources, the gap is unlikely to be compensated in full, Moody’s said.

In addition, it said that in the wake of a Brexit, it is likely fewer EU students would choose to study in the UK.

“Those that did, would be charged higher international student fees instead of domestic fees. Stricter immigration policies could also damage UK universities' global reputation and ability to attract international students.”

TfL would be hit by a slowing economy, Moody’s said. If population growth were to be slower than expected, this would dent ridership growth and farebox revenues.

“The operator could also be affected by a slowdown in business rates collections due to a Brexit-induced decline in economic growth. This is because TfL's capital programme will be funded through retained business rates in the London area from 2017-18.”