The LIBOR benchmark lenders use to calculate the interest rate for financial products will end after 2021 and will move to a safer, more transparent benchmark rate. This will affect any new loans from 1 April 2021 and any existing contract will need to be changed before 31 December 2021.
Therefore, any business with an existing loan or contract on LIBOR will need to be ready to switch to an alternative rate this year.
What to do now
Banks and lenders have already started to contact businesses to discuss contracts and the new rates. It is important that you have the right information to be ready for these discussions.
To that end, UK Finance, alongside other organisations such as the CBI, ACT, LMA and ICAEW, have created an introductory guide. It is designed specifically to help even the smallest business, or any employee, understand what is happening, if it affects you, what you can do, and it will also signpost you to resources available for further information.
This should help ensure any potential impact the rate change may have on business is minimised, urging you to take the necessary actions, including finding the extent of your exposure and understanding how it may affect payments, accounting systems or new financing.
We encourage you to put LIBOR on your list of priorities if you haven’t already started thinking about it to avoid any business disruption post 2021.
• The Sterling Risk-Free Reference Rates Working Group (RFRWG) has published a factsheet with information on the LIBOR transition.