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, characterized by high GDP per capita and developed product and labor markets. Effective monetary policy, but the fiscal position remains constrained. -- S&P Global Ratings forecasts growth of 0.8% in the U.K. in 2025, held back by inflationary pressures, tighter monetary policy, and a weakening global economy. Downside risks to the economy are high, reflecting recent global market volatility. -- 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 pound sterling as a reserve currency. -- The U.S. introduced 10% tariffs

...We forecast slower economic growth in the U.K. of 0.8% in 2025 after 1.1% in 2024. Last year's growth was uneven: A strong first half was followed by stagnating output in the second half, with net exports being the biggest drag. We expect higher inflationary pressures, tighter monetary conditions, and an upswing in uncertainty over global trade will hold back growth this year before a rebound in 2026. Global market volatility could also further drain private sector confidence. Tariffs on imports into the U.S. present downside risks to the U.K.'s economic outlook. Given the U.K.'s broadly balanced trade relationship with the U.S. (with a goods trade balance close to zero), its exports to the U.S. were subject to the newly introduced lowest tariff rate of 10% as of mid-April 2025 even before the U.S. President Donald Trump paused the implementation of higher tariffs for other countries. We estimate that this, together with the 25% tariff on aluminum, steel, and autos, will lower U.K. GDP...

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