Companies selling consumer goods face downgrades if political and market volatility continues, the ratings agency S&P has warned.

It said ratings pressure was “most likely to be felt” in the retail, consumer products and property sectors as they were most exposed to the cost of living crisis and some companies were heavily indebted. The agency added that if market volatility continued “concerns for financial stability may grow” and trigger a wholesale increase in the returns demanded by debt investors.

The analysts said “the highest number of weakest links” were in companies selling consumer goods, as many had been saddled with junk debt before an expected economic downturn in the UK. Andrew Bailey, the Bank of England governor, has said interest rates would have to rise more than initially expected to combat inflation.

Gareth Williams, head of corporate credit research at S&P Global, said: “Borrowing costs are rising and when companies do need to refinance it is highly likely that they will be paying more. In some cases if they have to borrow at very high interest rates then that might be something that would tip them over the edge. But we have to keep that within the broader context of the past few years. Companies have been able to refinance and borrow at very, very cheap rates of interest and many companies have locked those in.”

The ratings agency’s analysis of UK non-financial companies found that $96.3 billion (£85.3 billion) of bonds, loans and revolving credit facilities were to mature in the next 18 months, representing about 10 per cent of total corporate debt. The research showed that $5.7 billion of this was rated as junk debt as of July 1.

The consumer products sector will see the largest volume of debt maturing and S&P said refinancing would be “challenging” for companies with low-rated bonds and loans. Its analysts said in a research note: “In the near term, ratings pressure is most likely to be felt in domestic consumer-focused sectors such as retail, consumer products and real estate. Financing conditions remain difficult, with debt more expensive and less accessible.”

Matalan is looking to find a buyer as it faces £350 million of debt falling due for repayment next year. The retailer, which employs about 11,000 people across more than 200 stores, admitted in June that its ability to refinance its debt involved economic factors outside its management’s control. It has emerged that Elliott Advisors has begun talks with John Hargreaves, Matalan’s founder, potentially to fund an offer to buy the retailer.

S&P said many companies were in a strong financial position before another squeeze on consumer spending and a rise in the cost of borrowing, and that many were protected from the country’s economic woes because they only derive 23 per cent of their revenues domestically.

Williams said: “Everything that was done to help during Covid means the corporate sector is in a better place than it might have been, and so that’s an important offset. But the fundamental reality as well is that the cost of borrowing is rising and inflation has returned. It’s a different world to the one we have been in for the last ten years.”