Agency upgrades view of UK economy


Bank of England

A credit rating agency has upgraded its opinion of the future prospects for the UK economy in light of the "robust and broadening" recovery.

In a statement, Standard & Poor's affirmed its top AAA rating on British sovereign debt and said it was switching its outlook from "negative" to "stable".
It forecast growth of nearly 3% this year and 2.5% in 2015 and said it did not think fast-rising London house prices posed a risk to stability and that future rises would be "more contained".

But it warned that the rating would be at risk should Britain vote to leave the EU in the in/out referendum promised by David Cameron if the Tories with the 2015 general election.

"This would weaken the UK's economic prospects and be a negative factor for the rating," it said.

"Our opinion reflects not only the considerable trade links between the UK and the EU but, more importantly, the likely loss to the UK of a portion of its inbound direct investment, in particular from those non-European investors who have historically located in the UK, partly due to the benefits accruing from UK's membership of the EU.

"We also believe that the UK departing the EU would have a disproportionate impact on the UK business and financial services sector, which contributes an estimated 14% of British value-added."

It said the upgrade of the outlook was because "the risks to a sustainable economic recovery have diminished, and that the financial sector is in a stronger position than it has been for several years".
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