Scope Ratings GmbH (Scope) monitors and reviews its credit ratings on an ongoing basis and at least annually, or every six months in the cases of sovereigns, sub-sovereigns and supranational organisations that may act as a lender of last resort.

Scope performs monitoring reviews to determine whether material changes and/or changes in macro-economic 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 rating’s 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 announces the result of each monitoring review on its website and/or on its subscription platform ScopeOne.

Scope completed the monitoring review for the United Kingdom (long-term issuer and senior unsecured debt ratings in foreign- and local-currency of AA with Stable Outlook; short-term issuer ratings in foreign- and local-currency of S-1+ with Stable Outlook) on 9 September 2025.

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 ratings history can be found on scoperatings.com.

Key rating factors

For the updated rating report accompanying this review, please see here.

The United Kingdom’s AA credit rating is supported by: i) the reserve-currency status of sterling, gilts as a global safe asset and deep capital markets; ii) strong institutions such as sound financial supervisory, economic and monetary governance institutions alongside an independent monetary policy; iii) a robust sovereign debt structure with long average maturities and strong market access; and iv) a large, wealthy and highly diversified economy, which has proven resilient against external shocks.

The United Kingdom’s rating is challenged by: i) an elevated and increasing government debt and an elevated budget deficit; ii) heightened financing costs and a record of volatility in gilt markets; iii) a weak external sector given recurrent current-account deficits; and iv) remaining uncertainties surrounding post-Brexit UK-EU trade relations.

The United Kingdom faces large fiscal deficits resulting from growing spending pressure and less favorable funding conditions. Scope projects the general government deficit at 5.2% of GDP in 2025, down from 5.8% in 2024, and to continue declining to 4.9% in 2026 and 4.5% by 2030. The reduction of the primary deficit, from 2.7% of GDP in 2025 to 1.3% by 2030, reflects Scope’s expectation of the government’s sustained commitment to rebuild buffers in line with its fiscal rules. Despite the withdrawal of welfare spending cuts in the first half of the year due to parliamentary opposition, the government is expected to introduce additional tax and spending adjustments in the Autumn Budget 2025 to be outlined on 26 November.

The United Kingdom’s fiscal outlook is also supported by Labour’s majority in parliament and the next general election scheduled only in 2029. However, uncertainty surrounding the budgetary process has moderately increased following May's local elections and Labour’s commitment to rule out higher taxes on the workforce and cap corporation taxes following the rise in Employer National Insurance Contributions agreed in the Autumn Budget 2024 and effective since April 2025.

Moreover, the fiscal outlook is challenged by rising interest payments despite the Bank of England’s (BoE) reduction of its policy rate to 4% and the government’s long average debt maturity of 14 years. Scope expects net interest payments to increase from 6.4% of revenue in 2025 to about 8% by 2029-30.

Challenging funding conditions reflect elevated government debt, high scrutiny on fiscal rules, unwinding of the BoE’s Asset Purchase Facility, and heightened global uncertainties. Scope projects general government debt rising from 101.2% of GDP in 2024 to 104.6% in 2025 and around 115% by 2030, which is higher than the Covid peak (around 106% of GDP in 2020) but still lower than rating peers such as France (AA-/Stable; 122% by 2030) and the United States (AA/Negative; 127%).

Sluggish economic growth could furthermore complicate fiscal consolidation plans. Real GDP growth is projected at 1.2% in 2025 and 2026. Consumption and investment are expected to be hampered by a more restrictive fiscal stance and unemployment rate rising to 4.7% in April to June 2025. The United Kingdom’s open economy is also penalised by the United States’ tariffs, even though the bilateral trade agreement and exports driven by services support resilience. Weaker productivity weighs on the longer run GDP growth rate, estimated at 1.5% by 2030.

As the United Kingdom faces more challenging economic and funding conditions, the ability of the Labour government to implement ambitious and credible policy measures to reduce the budget deficit over the coming years will be critical to inform the credit rating trajectory.

The Stable Outlook represents the opinion that risks for the ratings are balanced over the next 12 to 18 months.

Downside scenarios for the ratings and Outlooks are if (individually or collectively):

1. Weaker fiscal outlook due to, for example, delays in budgetary reforms or worsening funding conditions;
    
2. Growth outlook weakened significantly;
    
3. Sterling’s status as a global reserve currency were challenged.

Upside scenarios for the ratings and Outlooks are if (individually or collectively):

1. Stronger fiscal outlook improved the trajectory of government debt-to-GDP;
    
2. Growth outlook improved significantly;
    
3. External vulnerabilities were curtailed significantly.

The methodology applicable for the reviewed ratings and/or rating Outlooks (Sovereign Rating Methodology, 27 January 2025) is available on scoperatings.com/governance-and-policies/rating-governance/methodologies.
This monitoring note is issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0.
Lead analyst: Thomas Gillet, Director
 
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