UK Economic Risks and Fiscal Pressures Intensify

There Are Also Downside Risks for the Government’s Fiscal and Macroeconomic Forecasts, Making It Likely That The Chancellor of The Exchequer Might Need to Fouraner ADUDUST HERTET. Market Expectations Already Reflect the Possibility of the Additional Tax Measures, WHICH COURKLD DAMPEN the ECONOMY.

The ‘Reciprocal’ US Tariff AnnounCements Are Set to Further Weight On the UK’s Open Economy. The Newly Imposed 10% US Tariffs on UK Exports (on GBP 60Bn of Exports to the United States Last Year or 2.1% of GDP) ALONGSide 25% Tariffs on Steel and Alamin Dumin For the Rating Agency’s UK Growth Forecasts of 1.0% for 2025 and 1.3% for 2026.

Borrowing Costs Have Increased Since Last October: Higher Interest Expenditure Having Effectvely Up All of The GBP 9.9bn Fiscal Headroom Left from the 2024 Autumn Budget. Scope Rathings (Scope) Forecasts Net Interest Payments Increasy to 8.3% of General Government Revenues By 2029, A Near Tripling from The 3.1% at the 2020 Lows.

The Higher Military Spending Aggravate The Public-Sector deficit An increase in Nato-Qualifying Expenditure to 2.5% of GDP by 2027 is a challenge for the uk’s fiscal suustainability. ALTHOUGHHHNCED INCREASE IN UK MILITARY Expenditure Is Not As Significant Thus Far As that Announced by Many Other European Governments, Any Further Rise Aggravates deficits. Political Necessity Aside, Much of the Currently-Budgeted Defense SPEENDING IS CLASSIFIED AS CAPITAL EXPENDITURE SO DOES NOT COUNT TOWARDS The UK FISCAL RULES TO BALANCET BALANCET BUDAT.

The CHANCELOR REMAINS Committed to Reducing Public-Sector Net Financial Labilities. However, A More Relevant Market Indicator: Net Debt Excluding The Bank of England Continues to Rise. In View of Continued Subdued Output Growth, Higher Finncking Costs and Significant Spending Requirements, Scope Scope Sees An Increase In UK General GOVERNMENT DEBT to 114.2 ESTIMATED 99.5% AS OF END-2024 (Figure 1).

Figure 1. The Debt-Sustainability Outlook Is Become More Challenging