The 54% slump in UK borrowing to US$83.3bn compared to US$181.4bn a year earlier is steeper than an 18% drop in activity across Europe, the Middle East and Africa (EMEA) to US$671bn.

Rising political and macroeconomic risks continue to depress companies’ appetite to borrow across the region, but the sharper UK slowdown is a attributable to Britain's vote to leave the European Union on June 23, senior bankers say.

"UK volume is significantly down, this is a Brexit effect. There has been no new M&A activity in the UK corporate space to replace deals that have run off," a loan syndicate head said.

After the Brexit vote, third quarter UK volume of US$17.7bn fell to its lowest quarterly total since the fourth quarter of 2009.

Only 25 UK loans were completed in the third quarter, which is the lowest quarterly UK number since the immediate aftermath of the financial crisis in the fourth quarter of 2008.

Germany overtook the UK as EMEA's biggest market in late October, with volume of US$115.6bn when the US$56.9bn loan backing drug and crop chemical group Bayer's (>> Bayer AG) agreed US$66bn takeover of US seed company Monsanto (>> Monsanto Company) was allocated.

UK lending of US$83.3bn for the year to date remains far off the US$272bn and 385 deals completed in 2015 and the US$272bn and 369 deals completed in 2014 and is unlikely to recover before the end of the year, senior bankers said.

Only 128 UK loans had been completed by the end of the third quarter.

"There's nothing to suggest that UK volume will jump up quickly to make up that ground. We will watch and see how the continued discussion around Brexit will affect confidence around corporate activity, which is the only way we can expect an upturn," the loan syndicate head said.

Since the referendum, 38 loans have been completed totalling US$24.8bn, according to TRLPC data.

WELL PREPARED?

The drop in borrowing is also a reflection of UK Plc's preparedness before the referendum, bankers said. Borrowing activity slowed 12-18 months prior to the vote to leave the European Union.

UK company treasurers are also using a wider range of financing that also includes bilateral loans, short-term trade and working capital financing, US and European private placements, Schuldschein as well as terming out debt in the bond markets.

"Its a combination of better forward-looking and more effective treasury management by UK corporates, which locked in medium-term financing well in advance, and the fact that they are looking at other sources and styles of financing," a senior banker said.

The UK market presently is lacking a large M&A loan similar to Bayer's jumbo deal.

Bankers were disappointed by the failure of UK gambling company William Hill's merger with Canadian peer Amaya (>> Amaya Inc) in mid October, which was backed by a £2.5bn-£3bn financing.

The deal and the loan financing it fell away on October 18 after opposition from investors.

"A financing of £2.5bn-£3bn in the UK corporate market would have been a fillip for loan volumes," a senior banker said.

Bankers are hoping that British American Tobacco's (>> British American Tobacco plc) US$47bn cash and stock offer to buy US cigarette maker Reynolds American Inc (>> Reynolds American, Inc.) could produce a new UK jumbo loan to cover the cash component of the bid.

Bankers are reporting a recent upturn in loan enquiries and activity from UK companies, due in part to the viability statement that is now required under the Financial Reporting Council's Corporate Governance Code.

Companies are now having to assess their liquidity and maturity requirements on a three-to-five-year basis, rather than the shorter 12-18 month timeframe used previously.

Companies such as G4S (>> G4S plc) and National Express (>> National Express Group PLC) issued bonds with loan backup facilities in case they are unable to tap the bond market, either as revolving credit facilities or as bridge loans to bond issues.

"Activity and enquiries have picked up in the second half of 2016," a second loan syndicate head said.

Some concern is lingering over sterling liquidity, particularly among Asian investors’ who are expressing concern about the prospects for the UK economy.

This is primarily affecting asset finance, particularly project and infrastructure finance, energy renewable deals such as wind and North Sea transactions, the bankers said.

"There is some nervousness from Asian lenders as to whether they want to do sterling deals now," the second loan syndicate said.

(Editing by Alasdair Reilly and Christopher Mangham)

By Tessa Walsh