Jump to content
House Price Crash Forum
Sign in to follow this  
gruffydd

S&p Maintains Negative Outlook On Uk

Recommended Posts

JUST OUT! United Kingdom 'AAA/A-1+' Sovereign Ratings Affirmed; Outlook Remains Negative

...in our view, a number of large and politically challenging spending decisions are still to be made, and Standard & Poor's medium-term economic forecasts for the U.K. are less optimistic than the assumptions underlying the budget. We therefore believe there is still a material risk that the U.K.'s net general government debt burden may approach a level incompatible with the 'AAA' rating.

As a consequence, we have maintained the negative outlook on the long-term rating on the U.K.

We will continue to review the rating in light of further information over the coming months about the extent of the expenditure-led fiscal consolidation.

LONDON (Standard & Poor's) July 12, 2010--Standard & Poor's Ratings Services said today that it affirmed its 'AAA' long-term and 'A-1+' short-term sovereign credit ratings on the United Kingdom (U.K.). The outlook remains negative. The transfer & convertibility assessment for the U.K. is 'AAA'.

... the U.K. faces challenges, mainly due to what we believe to be a substantial structural deterioration in public finances between 2007 and 2009, with gross general government debt increasing by 23% of GDP, more than in most other 'AAA' rated sovereigns. Yet, significantly supporting the rating is the newly-elected Conservative/Liberal Democrat coalition government's economic policy priority to close the fiscal gap. The government intends to eliminate the structural current budget deficit, with nearly three-quarters of the planned £113 billion (7.8% of GDP) adjustment to be delivered through lower spending by the 2014-2015 financial year.

We view the fiscal challenge facing the U.K. government as a formidable one. Based on our 2010 forecasts and under our assumptions of a 4% interest rate and nominal GDP growth of 4% annually, we estimate that an adjustment in the general government primary balance of close to 8% of GDP will be necessary to stabilize the general government debt burden. Our economic growth assumptions are lower than those of the new Office for Budget Responsibility (OBR), in large part because we think private sector deleveraging will depress demand to a greater extent than assumed by the OBR. We estimate domestic credit in the U.K. to be just over 200% of GDP in 2010, compared with a median of below 150% of GDP for 'AAA' rated sovereigns. So, while we agree with the OBR that a rebalancing of the economy will occur over the next five years with net exports contributing positively to growth (thanks to a 24% real effective depreciation in the exchange rate since 2007), we think the process will likely proceed more slowly.

"The negative outlook reflects the potential of a downgrade if the government does not implement its challenging fiscal consolidation program on the scale currently planned. A slackening of that effort, in our view, could put the U.K.'s net general government debt burden on a trajectory that would be incompatible with a 'AAA' rating," added Mr. Cullinan.

Conversely, we could revise the outlook back to stable if this autumn's Spending Review is agreed in a manner consistent with the 2010 budget projections, and early success in its implementation suggests to us that the government debt burden would peak in the next three years and then begin to ease as per the budget forecasts.

Edited by gruffydd

Share this post


Link to post
Share on other sites
“The coalition government has set out what we view as a strong framework for fiscal consolidation,” London-based S&P analysts Trevor Cullinan and David Beers said in a research report today, affirming the AAA credit rating. “There is still a material risk that the U.K.’s net general government debt burden may approach a level incompatible with the AAA rating.”

There is a divergence between what out politicians say are the prospects and what a ratings agency sees. IMO, there is far too much optimism about our economy and we are stilling living off the fat of Brown's QE and artificially low IR.

Something has to give soon. So far stocks have been flying up, Sterling is doing well and house prices are still holding slightly above the bottom reached in 2008.

Share this post


Link to post
Share on other sites

The focus is Euro-land, but once thats sorted (ish) then expect them to look else where.

"DC" & "Ozzy" will try to cut but when REAL unless breaks cover they have to spend again.................BTW did you notice how some people tried to paint the killer Moat as some kind of Hero?..................forget the past 25 years.......we are going to see people become folk Hero's for things that a few years ago people would have spat in their faces........i am older enough to remember the Baadder-Meoff in Germany.

Mike

Share this post


Link to post
Share on other sites

The focus is Euro-land, but once thats sorted (ish) then expect them to look else where.

"DC" & "Ozzy" will try to cut but when REAL unrest (riots) breaks cover they have to spend again.................BTW did you notice how some people tried to paint the killer Moat as some kind of Hero?..................forget the past 25 years.......we are going to see people become folk Hero's for things that a few years ago people would have spat in their faces........i am older enough to remember the Baadder-Meoff in Germany.

Mike

Share this post


Link to post
Share on other sites
“The coalition government has set out what we view as a strong framework for fiscal consolidation,” London-based S&P analysts Trevor Cullinan and David Beers said in a research report today, affirming the AAA credit rating. “There is still a material risk that the U.K.’s net general government debt burden may approach a level incompatible with the AAA rating.”

There is a divergence between what out politicians say are the prospects and what a ratings agency sees. IMO, there is far too much optimism about our economy and we are stilling living off the fat of Brown's QE and artificially low IR.

Something has to give soon. So far stocks have been flying up, Sterling is doing well and house prices are still holding slightly above the bottom reached in 2008.

It is all gradually easing into a different gear IMO. The cuts implementation will be quite enough to increase the velocity of change. There were 457 new properties for sale in the last 7 days in a 10 mile radius from me. Had a quick look and almost all have not been with another agent and reappeared as 'new'. Mortgage finance is about to dry up considerably. Banks are beginning to warn their investors of tough times. Wages are either falling or about to and public sector jobs will be axed in large numbers, taking some private sector jobs with them.

Share this post


Link to post
Share on other sites

The focus is Euro-land, but once thats sorted (ish) then expect them to look else where.

"DC" & "Ozzy" will try to cut but when REAL unless breaks cover they have to spend again.................BTW did you notice how some people tried to paint the killer Moat as some kind of Hero?..................forget the past 25 years.......we are going to see people become folk Hero's for things that a few years ago people would have spat in their faces........i am older enough to remember the Baadder-Meoff in Germany.

Mike

Mike,

I find that fascinating. Can you elaborate?

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...
Sign in to follow this  

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 259 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.