Higher borrowing costs, together with uncertainty about the outlook for the UK economy, and its implications for corporate earnings, supports the deteriorating credit risk picture over the next year.
Moody’s baseline economic scenario for the UK assumes that economic growth will continue to be below potential for some time. Annual real GDP growth for the UK is forecasted to be an anemic 0.65% in 2023, weakening further to 0.34% in 2024 under the baseline scenario. The scenario also anticipates that the BoE will not implement further rate hikes, but that rate cuts would be expected to start only in mid-2024, while the return to the long-run equilibrium rate of 2% is expected to be much more gradual.1
The higher-for-longer rates…
