Scope Ratings GmbH (Scope) monitors and reviews its credit ratings on an ongoing basis and at least annually, or every six months in the case of sovereigns, sub-sovereigns and supranational organisations.

Scope performs monitoring reviews to determine whether material changes and/or changes in macroeconomic or financial market conditions could have an impact on the credit ratings. Scope considers all available and relevant information when undertaking the monitoring review.

Monitoring reviews are conducted by performing a peer comparison, benchmarking against the rating-change drivers, and/or reviewing the credit ratings’ performance over time, as deemed appropriate by the Lead Analyst or Analytical Team Head, in addition to an assessment of all aspects of the relevant methodology/ies, including key rating assumptions and model(s). Scope publicly announces the completion of each monitoring review on its website.

Scope completed the monitoring review for the United Kingdom (AA/Stable; S-1+/Stable) on 6 December 2021.

This monitoring note does not constitute a credit rating action, nor does it indicate the likelihood that Scope will conduct a credit rating action in the short term. Information about the latest credit rating action connected with this monitoring note along with the associated rating history can be found on www.scoperatings.com/app.scope-one.com.

Key rating factors

The United Kingdom’s long-term AA/Stable ratings are underpinned by the following credit strengths: i) the country’s large, wealthy and diversified economy; ii) strong institutions including robust financial supervisory, economic and monetary governance frameworks; and iii) a robust debt profile and strong market access. These factors increase the country’s resilience to economic shocks including the Covid-19 pandemic. Challenges relate to: i) the country’s high public debt; ii) a weak external position with persistent current account deficits; and iii) the prolonged uncertainties surrounding the implementation of the post-Brexit UK-EU trade agreement.

The Stable Outlook reflects Scope’s view that risks to the ratings are balanced over the next 12 to 18 months.

The rating/Outlook could be downgraded, individually or collectively, if: i) a significant weakening in economic and fiscal outlooks led to a rising trajectory of public debt and weakened debt sustainability; ii) Brexit resulted in more severe than anticipated attrition of the UK services sector and/or risks to the UK’s constitutional integrity materialised; and/or iii) external vulnerabilities increased or Sterling’s status as a reserve currency were challenged.

Conversely, the rating/Outlook could be upgraded if, individually or collectively, the United Kingdom’s: i) public finances improved, resulting in a material improvement in fiscal outlook including a downward trajectory of public debt; and/or ii) external vulnerabilities were reduced. 

For the updated report accompanying this review, click here.

The methodology applicable for the reviewed rating(s) and/or rating Outlook(s) (Sovereign Ratings, 8 October 2021) 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 Eiko Sievert, Director

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