S&P Global Ratings has cautioned that the UK's public finances remain fragile despite recent revenue measures in the Autumn Budget. The agency pointed to weak economic growth and structural spending pressures as factors that will maintain fiscal stress in the medium term, potentially affecting demand for gilts and the resilience of the sterling.
S&P anticipates that deficits will narrow gradually through 2028 but warns that the path to fiscal consolidation is fraught with risks. Rising spending demands and limited political tolerance for further tightening could exacerbate fiscal vulnerabilities. Key pressures include costs related to health, social care, and debt interest, which may lead to higher fiscal risk premiums in gilt yields and increased sensitivity of the sterling to fiscal developments.
S&P Warns of Persistent UK Fiscal Fragility Despite Budget Measures
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