United Kingdom Country Risk Report

Published 28 January 2015 | Quarterly

  • 52 pages
  • Instant access to your report online and PDF format through your account library
  • Includes 3 free updated quarterly reports
 
$1,195.00
United Kingdom Country Risk Report

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 (CAD) forecasts for 2015, from 3.3% of GDP previously to 4.8% in 2015.

Key Risks To Outlook

  • Downside Risks To Medium-Term Growth: There are downside risks to our economic growth forecasts, particularly stemming from the impact of fiscal consolidation and the eurozone sovereign debt crisis. In the case of the latter, we stress that even though near-term crisis risks in the euro area have dissipated somewhat, the anaemic pace of structural reform means that the single currency union will remain vulnerable to renewed stresses.

Macroeconomic Forecasts (United Kingdom 2013-2016)
Indicator 2013 2014e 2015f 2016f
Real GDP growth, % y-o-y 1.7 3.1 2.4 2.3
Nominal GDP, USDbn 2,499.9 2,800.6 2,787.0 2,938.0
Consumer price inflation, % y-o-y, eop 2.0 0.9 0.8 1.5
Exchange rate GBP/USD, eop 0.63 0.61 0.62 0.61
Budget balance, % of GDP -5.8 -5.0 -4.0 -3.2
Current account balance, % of GDP -4.5 -5.0 -4.8 -4.2
BMI/ONS

Click here to explore data

Table of Contents

Executive Summary
5
Core Views
5
Major Forecast Changes
5
Key Risks To Outlook
5
Chapter 1: Political Outlook
7
SWOT Analysis
7
BMI Political Risk Index
7
Domestic Politics
8
Hung Parliament Likely In 2015
8
The May General Election's outcome is too difficult to call, but a hung parliament appears the most likely outcome based on polling and
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
8
Long-Term Political Outlook
9
Political Fragmentation To Herald Greater Instability
9
The United Kingdom is undergoing a once-in-a-generation shift in its political environment, with a multi-party system emerging, making
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
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
13
SWOT Analysis
13
BMI Economic Risk Index
13
Economic Activity
14
Recovery Will Maintain Momentum
14
We believe the UK's economic recovery will continue in 2015 and beyond, powered by a recovery in real wages and further
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
14
Monetary Policy
16
Rate Hike Could Be Delayed Until 2016
16
Strong disinflationary trends, decelerating economic activity and a precarious position for domestic households suggest that on balance,
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
16
Balance Of Payments
18
External Weakness Dragging C/A Wider
18
The diverging economic growth trajectory of the eurozone and the UK is leading to a widening of the income account deficit, which in
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
18
Chapter 3: 10-Year Forecast
21
The UK Economy To 2024
21
UK Will Outperform Eurozone Over The Long Term
21
Despite the current economic stagnation in the UK, we hold to a more upbeat assessment over the longer term and expect growth to
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
21
Chapter 4: Operational Risk
25
SWOT Analysis
25
Operational Risk Index
25
Operational Risk
26
tABLE: Developed States - Lab our Market Risk
26
Table : Developed States - Logistics Risk
29
Table : Developed States - Crime And Security Risk
31
table : Developed States - Trade And Investment Risk
33
Chapter 5: Key Sectors
35
Autos
35
TABLE: Aut os Total Market - Historical Data And Forecasts
35
Food & Drink
39
TABLE: Food Consumption Indicators - Hist orical Data & Forecasts
40
TABLE: Hot Drink Value/Volume Sales , Production & Trade - Historical Data & Forecasts
43
Other Key Sectors
45
Table : Pharmaceuticals & healthcare Sector Key Indicators
45
Table : Oil & Gas Sector Key Indicat ors
45
Table : Infrastructure Sector Key Indicators
45
Table : Defence & Securit y Sector Key Indicators
46
Table : Telecoms Sector Key Indicators
46
Table : Freight transport sector Key Indicators
46
Chapter 6: BMI Global Assumptions
47
Global Outlook
47
New Era For Oil
47
Table: Global Assumptions
47
Table : Developed States , Real GDP Growth, %
48
Table : BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, %
48
Table : Emerging Markets , Real GDP Growth , %
49

The United Kingdom Country Risk Report helps businesses with market assessment, strategic planning and decision making to promote growth and profitability in United Kingdom. It is an essential tool for CEOs, Chairmen, Finance Directors/CFOs, Managing Directors, Marketing/Sales Directors with commercial interests in this emerging market.

An influential new analysis of United Kingdom's economic, political and financial prospects through end-2019, just published by award-winning forecasters, Business Monitor International (BMI).

Key Uses

  • Forecast the pace and stability of United Kingdom's economic and industry growth through end-2019.
  • Identify and evaluate adverse political and economic trends, to facilitate risk mitigation.
  • Assess the critical shortcomings of the operating environment that pose hidden barriers and costs to corporate profitability.
  • Contextualise United Kingdom's country risks against regional peers using BMI's country comparative Risk Index system.
  • Evaluate external threats to doing business in United Kingdom, including currency volatility, the commodity price boom and protectionist policies.

The United Kingdom Country Risk Report by Business Monitor International (BMI) includes four major sections: Economic Outlook, Political Outlook, Operational Risk and Key Sector Outlook.

Economic Outlook:

How will the United Kingdom' economic policy-making and performance impact on corporate profitability over 2015-2019?

BMI provides our fully independent 5-year forecasts for United Kingdom through end-2019 for more than 50 economic and key industry indicators. We evaluate growth, and also forecast the impact of economic management.

Economic Outlook Contents

The United Kingdom Country Risk Report features BMI's forecasts with supporting analysis for 2015 through to end-2019, set against government views and BMI's evaluation of global and regional prospects.

Key Areas Covered:

Data:

  • Full 10-year forecasts with data - for key macroeconomic variables including GDP (real growth and per capita), population, inflation, current account balance and the exchange rate.
  • BMI's comprehensive Risk Index system - rates each country worldwide for economic and political risk, and rates the business environment, within a global and regional context.

Written Analysis:

  • Economic Activity - real GDP growth, employment, inflation, consumption (retail sales and confidence).
  • Balance of Payments - trade and investment, current and capital account.
  • Monetary Policy - interest rate trends (bank lending and deposit rates) and inflation (producer price and consumer price).
  • Exchange Rate Policy - currency controls, foreign investment flows, exchange rates and foreign exchange reserves.
  • Fiscal Policy - macroeconomic strategy and policies, government finance and tax reforms.
  • Foreign Direct Investment - approvals, inflows and climate.
  • External Debt - debt profile (short and long-term plus public and private sector obligations).
  • Global Assumptions - forecasts for each year to end-2019 covering: major commodities, growth in key regions, inflation, and interest and exchange rates, in the United States, Japan, China and the eurozone.

Key Benefits

  • Rely upon BMI's 100% independent forecast scenarios for United Kingdom and underlying assumptions - we take no advertising and are privately-owned.
  • Exploit the benefits of BMI's comprehensive and reliable macroeconomic database on United Kingdom, sourced and fully maintained by BMI from an extensive network of private sector, government and multilateral contacts.
  • Gain key insights into the current and future direction of government economic policy, which could significantly affect your company's business prospects, from BMI's team of analysts and economists.

Political Outlook:

What are the political risks to doing business in United Kingdom over the next 5-years?

BMI's United Kingdom country Risk Index evaluates the short- and medium-term threats to political stability.

Political Outlook Contents

  • SWOT Analysis for the United Kingdom Market - Political Strengths, Weaknesses, Opportunities and Threats facing United Kingdom.
  • Political Stability and Risk Assessment - BMI's Risk Index assesses explicit short- and long-term risks to political stability; latest positioning and trends for United Kingdom's risk are compared with regional and global averages.
  • Current Administration and Policy-making BMI assesses the threats to the continuity of economic policy, and likely changes to the business operating environment.
  • Long-Term Political Outlook BMI examines the structural risks to the stability of United Kingdom’s political system and the dominant public policy issues likely to affect decision-makers, and outlines scenarios for how the state could evolve in the medium to long term.

Key Benefits

  • Benchmark United Kingdom's risk profile against its neighbours, the global and regional average, allowing easy comparison of risks between key business markets.
  • Identify, evaluate and anticipate political and security risks to the business environment, and to your company's current operations and future plans.
  • Gain valuable insights into government and policy-making, through BMI's specialist team of analysts and economists, and their network of private and public sector sources.

Operational Risk

What are the current operational risks and difficulties associated with doing business in United Kingdom?

The Operational Risk section gives an evaluation of current risks and difficulties associated with operating in the market. It also provides a brief overview of the regional Operational Risk Index which benchmarks United Kingdom against its neighbours.

Operational Risk Contents

The chapter provides a summary of the main threats in the country, within:

  • Labour Market Risk (Education; Availability of Labour; and Labour Costs)
  • Logistics Risk (Market Size and Utilities; Quality and Extent of the Transport Governance)
  • Trade and Investment Risk (Economic Openness; Government Intervention; and Legal Risks)
  • Crime and Security Risk (Crime; Terrorism; and Interstate Conflict risks).

Key Sector Outlook*

Which industry sectors in United Kingdom will grow fastest, and where are the major investment opportunities in the market?

BMI identifies investment opportunities in United Kingdom's high growth industries including automotives, defence & security, food & drink, freight transport, infrastructure, oil & gas, pharmaceuticals & healthcare and telecommunications & IT.

Key Areas Covered:

  • Market Overview - Size and value of each industry, including recent sector developments and major industry key performance indicators (KPIs) that have impacted company performance.
  • 5-year Industry Forecasts - Forecasts for each year over 2015-2019, using BMI's proprietary industry modelling technique, which incorporates key domestic and international indicators - including economic growth, interest rates, exchange rate outlook, commodity prices and demographic trends - to provide fully integrated forecasts across and within each industry.
  • Demand- and Supply-Side Data/Forecasts - BMI's industry data covers both the output of each industry and the domestic demand, offering clear analysis of anticipated import/export trends, as well as capacity growth within each industry.

Key Benefits

  • Target strategic opportunities in high growth industries, which are benefiting from global mega trends, and thus offer strong investment and growth opportunities.
  • Compare the growth path of different industries to identify which are best placed to benefit from domestic and international economic prospects, and which have historically suffered from volatile growth trends - a key indicator of future risks.

*Not all Country Reports contain the Key Sector Outlook chapter. Please enquire above for more information.

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Testimonials

The sections that I find most interesting and useful are the macroeconomic data and forecasts for the country, top export destinations and economic activity. The indicators/analysis of these areas helps us orient our thinking, our assumptions and, consequently, our decisions in the commercial area.

Country Manager, DHL Express