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United Kingdom Country Risk Reports Q2 2015

United Kingdom Country Risk Reports Q2 2015

Core Views

The UK economy outperformed most major developed states in 2014, and will continue to expand at a robust clip in 2015.

In light of positive structural economic reforms undertaken by the government, coupled with flexible monetary and exchange rate policies, we remain bullish on the long-term economic prospects for the UK relative to the eurozone over the longer term.

Despite numerous ructions between the ruling Conservatives and Liberal Democrats, we expect the coalition government to hold firm through to the next parliamentary election in 2015.

Major Forecast Changes

We have pushed back our expectations for the first policy rate hike by the Bank of England to 2016.

We have downgraded our current account deficit forecasts for 2015, from 3.3% of GDP previously to 4.8% in 2015.


Executive Summary
Core Views
Major Forecast Changes
Key Risks To Outlook
Chapter 1: Political Outlook
SWOT Analysis
BMI Political Risk Index
Domestic Politics
Hung Parliament Likely In 2015
The May General Election's outcome is too difficult to call, but a hung parliament appears the most likely outcome based on polling and
our expectations for the UK economy in Q115.
TABLE: Political Overview
Long-Term Political Outlook
Political Fragmentation To Herald Greater Instability
The United Kingdom is undergoing a once-in-a-generation shift in its political environment, with a multi-party system emerging, making
coalition governments increasingly common. A multi-party system will provide more opportunities for regional issues as separatist
parties gain ground, while immigration and EU membership will remain major themes as the UK Independence Party shapes the debate
on the political right.
Chapter 2: Economic Outlook
SWOT Analysis
BMI Economic Risk Index
Economic Activity
Recovery Will Maintain Momentum
We believe the UK's economic recovery will continue in 2015 and beyond, powered by a recovery in real wages and further
improvements in labour market conditions. Although real GDP growth rates will decelerate slightly over the coming quarters, the UK will
likely outperform most regional peers.
TABLE: GDP By Expenditure
Monetary Policy
Rate Hike Could Be Delayed Until 2016
Strong disinflationary trends, decelerating economic activity and a precarious position for domestic households suggest that on balance,
the Bank of England will not hike rates until 2016 at the earliest.
TABLE: Monetary Policy
Balance Of Payments
External Weakness Dragging C/A Wider
The diverging economic growth trajectory of the eurozone and the UK is leading to a widening of the income account deficit, which in
turn is driving the current account wider. While the growing negative net international investment position is sustainable over the short
term, a decline in foreign direct investment or portfolio inflows could ultimately force a rebalancing via a weaker sterling.
TABLE: Curent Account
Chapter 3: 10-Year Forecast
The UK Economy To 2024
UK Will Outperform Eurozone Over The Long Term
Despite the current economic stagnation in the UK, we hold to a more upbeat assessment over the longer term and expect growth to
outperform the eurozone. Supportive of this view is the relatively competitive nature of the UK economy, independent monetary and
exchange rate policies as well as a major fiscal reforms. However, we warn that a number of challenges remain, such as an ageing
workforce as well as low educational and training attainment in the poorest areas.
tABLE: Long-Term Macroeconomic Forecasts
Chapter 4: Operational Risk
SWOT Analysis
Operational Risk Index
Operational Risk
tABLE: Devel oped States – Lab our Market Risk
Table : Devel oped States – Logistics Risk
Table : Devel oped States – Crime And Secu rit y Risk
table : Devel oped States – Trade And Investme nt Risk
Chapter 5: Key Sectors
Autos
TABLE: Aut os Total Market – Hist orical Data And Forecasts
Food & Drink
TABLE: Food Consumpti on Indicators – Hist orical Data & Forecasts
TABLE: Hot Drink Value /Volume Sales , Producti on & Trade – Hist orical Data & Forecasts
Other Key Sectors
Table : Pha rmaceuticals & healthca re Sector Key Indicators
Table : Oil & Gas Sector Key Indicators
Table : Infrast ructu re Sector Key Indicators
Table : Defe nce & Secu rit y Sector Key Indicators
Table : Telec oms Sector Key Indicators
Table : Freight transp ort Sector Key Indicators
Chapter 6: BMI Global Assumptions
Global Outlook
New Era For Oil
Table: Global Assumptions
Table : Devel oped States , Real GDP Growt H, %
Table : BMI VERSUS BLOO MBERG CON SENSUS REAL GDP GRO WTH FORECASTS, %
Table : Eme rgi ng Markets , Real GDP Growth , %

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