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.