Ratings agency Standard & Poor’s has warned that Brexit could harm UK airport businesses, potentially threatening credit ratings if leaving the EU proves severe.

In an analysis paper, Countdown to Brexit: The Growing Risks For UK Airports, S&P Global Ratings said although the country’s airports had enjoyed a grace period after the UK’s EU membership referendum two years ago, the repercussions of the split process were now starting to have an effect.

The analysts wrote: “The performance of the UK’s regulated airports, Heathrow and Gatwick, was supported by positive inflation and a weak pound, which has boosted retail revenues.

“But traffic growth is slowing down due to, among others factors, weaker domestic growth and increasing uncertainty about a Brexit deal.”

Traffic growth rates weakened to flat on average for all UK airports in first quarter of this year, S&P said, forecasting annual growth of flat to 2% for Gatwick and Heathrow.

The possibility of air travel disruption to and from the UK was now becoming real, the report said, adding it was crucial for the preservation of air traffic rights that a pact was made between the UK and European Common Aviation Area.

Considering whether its credit ratings would hold up on airports heavily exposed to EU-UK traffic if it were interrupted in “a doomsday scenario”, S&P said Gatwick’s cash flows would be hit the hardest due to its high proportion of EU traffic.

But the West Sussex-located London airport faced limited refinancing and funding risk, it said. Heathrow’s relatively lower exposure, however, would be outweighed by its negative cash flow generation.

“In all cases the extent of the rating impact would depend on the length of the disruption, mitigating actions by airports, and traffic assumptions after the initial disruption,” it said.

Another negative factor for UK airports was the fact that regulatory pressures for regulated infrastructure assets in the country might be increasing for airports too, S&P said.

“There is some evidence that public and political pressure in the UK is influencing decisions by regulators to lower the cost of capital, which could reduce returns,” the analysts said.

If this change began to spread to other sectors such as transportation, the regulated airports — Heathrow and to a much lesser extent Gatwick — would be affected the most, they said.

As a positive factor, the report noted the parliamentary approval for a third runway at Heathrow that was secured in June following years of delays, and said airport expansion plans in general might now find stronger political support in the UK.

“Low private investment in the UK, together with the prospects of slower economic growth, are driving political calls to local and foreign infrastructure investors to promote investment in the country,” S&P said.

A number of institutional owners of UK airports did not comment directly on the report but referred IPE Real Assets to recent comments and reports.

Outlining Brexit-related risks in its 2017 annual report, Spanish infrastructure firm Ferrovial — leader of the consortium FGP Topco which owns Heathrow — struck an optimistic note about the outlook for the airport.

The forecast for a potential slowdown or standstill in the British economy was not expected to significantly affect Heathrow’s activity when compared to similar situations in the past, it said, in light of the relevance of the asset and its current full-capacity status.

“In addition, the decision of the British government to move forward with the third runway project pending parliamentary approval [not yet given at the time of the report] highlights the importance that the airport has for this country and, therefore, its lower exposure to this [Brexit] risk,” it said.

Other investors in the consortium behind Heathrow are the Qatar Investment Authority, Caisse de dépôt et placement du Québec, GIC, Alinda Capital Partners, China Investment Corporation and Universities Superannuation Scheme.

MAG, which owns Manchester Airport, London Stansted Airport and East Midlands Airport, is owned by the 10 boroughs of Greater Manchester and Australian fund manager IFM Investors.

Charlie Cornish, chief executive of Manchester Airports Group (MAG), last month called on the UK government to match its backing for Heathrow expansion with “specific and practical proposals to improve rail access and maximise the potential of airports like Manchester, London Stansted and East Midlands”.

Releasing full-year 2017/18 financial figures, Cornish said: “As the UK prepares to leave the EU, we are confident that the UK government and the EU recognise the importance of providing confidence to passengers and airlines, and we welcome the commitment from both sides to putting in place a framework that will enable air services to continue post Brexit.”

Global Infrastructure Partners, which owns Gatwick, declined to comment.