Moodys out with their latest research on the UK
The United Kingdom's (Aa1 stable) economic growth will likely remain solid in 2015-16, but its high debt burden remains a key weakness, says Moody's Investors Service in a report published today.
Moody's annual UK Credit Analysis is available on www.moodys.com. Moody's subscribers can access this report via the link provided at the end of this press release. The rating agency's report is an update to the markets and does not constitute a rating action.
According to Moody's, the UK's economic growth will likely remain robust, with real GDP forecast to increase by 2.7% and 2.4% in 2015 and 2016, respectively. "However, the UK's economic growth pattern remains relatively unbalanced and mainly driven by domestic demand and the services sector, while exports and manufacturing remain subdued", says Kathrin Muehlbronner, a Senior Credit Officer and author of the report. Ms Muehlbronner also notes the continuing high level of household debt, which makes households and the banking sector vulnerable to a house price shock or rapid increases in interest rates.
Longer-term growth challenges for the UK economy might arise if the weak productivity performance of the past several years persists. In Moody's view, it is positive that the government aims to address the weakness of productivity growth through measures such as large-scale infrastructure investment and reforms to improve the skill levels in the workforce, although none of these reforms will likely bring quick results. Longer-term economic growth prospects have an important bearing on Moody's assessment of the UK's economic strength.
Moody's also views the government's track record and continuing strong commitment to reduce the elevated budget deficit as credit positive.
Full report here
