We expect rising government indebtedness over the medium term to pressure future UK (rated by Scope Ratings AA/Stable Outlook) governments to raise taxes, unless there is a sustained improvement in the growth outlook. Economic output is set to increase by 0.6% this year and slow to 0.4% in 2024 before returning to the UK’s potential growth of around 1.5% in 2025.
The share of UK government gross debt as a percentage of GDP stood at 101% in 2022, below that of peer countries such as France (rated AA/Negative Outlook), 112%, and Belgium (AA-/Negative Outlook), 105%. However, given the increasing spending pressures, flexible fiscal framework and little headroom in fiscal targets kept by the current chancellor compared with his predecessors, we expect debt to gradually…
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