Scope Ratings reviews its ratings either yearly, or at least every six months in the case of sovereign, sub-sovereign and supranational issuers. Monitoring reviews are unrelated to the calendar that outlines public finance rating actions.

Scope performs monitoring reviews to determine whether outstanding ratings remain proportionate. Monitoring reviews are conducted either by performing a portfolio review in terms of the applicable methodology, latest developments, and the rated entity’s financial and operational aspects relative to similarly rated peers; or through targeted reviews on an individual credit. Scope publicly announces the completion of each monitoring review on its website.

Scope completed the monitoring review for the United Kingdom (AA/Negative; S-1+/Stable) on 23 July 2020. This monitoring note does not constitute a rating action nor does it indicate the likelihood of a credit rating action in the short term. The latest information on the credit ratings in this monitoring note along with the associated rating history can be found on www.scoperatings.com.

Key rating factors

Scope’s assignment of the United Kingdom’s AA sovereign ratings reflects a wealthy and diversified economy, and significant institutional strengths. In addition, the UK benefits from deep capital markets, a very favourable public debt structure, including a 15.2-year average maturity of debt securities, manageable annual gross government financing needs, enhanced financial system buffers and sterling’s G4 reserve currency status alongside an independent monetary policy under the Bank of England. However, the Negative Outlook represents Scope’s assessment that the current constellation of risks remains skewed to the downside. 2020’s global economic and public health crisis has dealt significant damage to public and private sector balance sheets in the UK, with elevated government sector deficits and government debt rising to well above 100% of GDP. Here, asset purchases of the Bank of England are, however, easing government financing rates to record lows and transferring a significant share of government debt to the central bank balance sheet – curtailing the stock of rated central government debt owed to the private sector. Brexit related uncertainty surrounding the UK’s future trade relationship with the European Union remains a risk, including the scenario of a disruptive 'cliff-edge' departure by the UK from the EU’s single market and customs union at year-end, a contingency which could severely hinder the strength of the UK’s post-crisis economic recovery. The ongoing weakening in UK public finances, low productivity growth and a weak external position represent challenges.

The methodology applicable for the reviewed rating(s) and/or rating Outlook(s) (Public Finance and Sovereign Ratings, 21 April 2020) is available on https://www.scoperatings.com/#!methodology/list.
This monitoring note is issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0.
Lead analyst: Dennis Shen, Director

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