United Kingdom

This report does not constitute a rating action. Overview Institutional and economic profile Flexibility and performance profile The U.K. is the world's sixth-largest economy and is characterized by high GDP per capita and developed product and labor markets. Highly credible and effective monetary policy, but fiscal headroom has been shrinking. -- We consider the U.K.'s economy to be developed and diversified, and that it benefits from the strength and independence of key institutions. -- The Bank of England's monetary policy is characterized by a wide array of available and effective conventional and unconventional instruments, and we view the British pound sterling as a reserve currency. -- Nevertheless, the economic outlook has been progressively weakening and we expect real GDP to

...S&P Global Ratings expects the U.K.'s general government deficit to average 4.5% of GDP over 2023-2025, taking into account the reversal of most of the tax-cutting measures that were announced in September 2022 as part of the minibudget. A U-turn on the minibudget was announced on Oct. 17. We estimate that this will reduce our previously projected budget deficits by an average of 1% of GDP a year, but downside risks to the U.K.'s fiscal position remain. These include risks from lower economic growth, potential further rises in energy prices, and higher government borrowing costs. Despite the resignation of Prime Minister Liz Truss on Oct. 20, we expect the newly appointed Chancellor of the Exchequer, Jeremy Hunt, and the incoming prime minister, Rishi Sunak, to proceed with cancelling most of the tax-cutting measures announced in the minibudget, as well as unveiling a medium-term fiscal plan in the coming weeks. We forecast that the U.K. will undergo a technical recession, with output contracting...

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