Transport for London (TfL) currently has around £11.7 billion of debt, and that has now been put under review for a ratings downgrade by one of the three big ratings agencies, Fitch.

The cost of servicing corporate and government debt is affected by how highly the agencies rate the likelihood of the debt being repaid, with a downgrade pushing up the cost of serving the debt.

TfL’s debt is closely linked to the UK government’s ratings, so considered to be very good, but in light of the Coronavirus economic downturn, the UK government debt ratings have been reduced to AA- with a negative outlook.

Fitch estimate’s that that the UK’s GDP could fall by close to 4% in 2020 due to the impact from the virus. That economic hit puts TfL’s debt under review for a downgrade as well due to the reduction in passengers on public transport. TfL’s debt had been expected to reach £12.5 billion by the end of the 2020 financial year, but that was before the coronavirus shut-down blew a half-billion pound hole in its projected income from ticket sales.

TfL had a cash balance at end-March 2020 of £2.1 billion, sufficient to cover the short-term impact of the coronavirus. TfL’s financial policies require it to keep a minimum cash balance of £1.2 billion to provide liquidity to absorb sudden financial shocks and strategic risks. TfL also aims to hold an additional £600 million risk buffer on top of this, which could be used to mitigate the short-term impact of the coronavirus.

TfL says that it remains in discussions with the government about how the impact of the coronavirus will be managed.

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5 comments on “Transport for London debt put on review for Coronavirus downgrade
  1. All the money being printed will just turn into inflation and get rid of TfL’s debts that way.

    Won’t it?

  2. JP says:

    Or the government could write it off like it did for those NHS trusts behind with their mortgages today. Good: more dosh at last for the bits that need it. Bad: a bum deal for them that played by the rules, however onerous.
    I in no way mean to belittle the free from cradle-to-grsve envy of the civilised world sainted saintly NHS at all before you spit out your tea in disgust – how’s the coffee withdrawals going? – I’d just like to point out that this is inherently unjust. Roolz is roolz and they shd be changed not their results white-washed, Why not TfL, why not your local council, why not you? Dam bursting handouts are logically unfair because they have to wash some debts away and drown the majority of the rest of us. Public good n all that, but we all gotta pay to ride this train. Eventually.

  3. Terry Jones says:

    Ian – just to let you know, the link for the TFL Roundels 2048 Game, in your 25th March newsletter, doesn’t work.

    thanks

  4. MT says:

    It’s right that the gvt bail them out. In recent years they’ve taken £700m from TFL, the Mayor another £700m (fare freeze policy), then we had the Crossrail delays. I’m surprised the finances haven’t come to a head before now.

  5. Joseph says:

    This pandemic is continuing to mess the economy day in day out. Let hope it will end soon.

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