GDP figures merely endorse UK’s ranking

Today’s news that the UK economy shrank in Q2 2012 by 0.7% quarter on quarter (and 0.8% year on year), marking a third consecutive quarterly decline, provides a gloomy backdrop for Conservative chancellor (finance minister) George Osborne’s deficit-reduction plans. However, it does not alter the fact that the sovereign was already regarded as a riskier bet than several of its European partners (European sovereigns still among safest), according to ECR’s Country Risk Survey.



The UK’s score has fallen by one point since January, one of seven G10 countries to be downgraded (Euromoney Country Risk Q2 2012 Results: Global risk ratchets up in 1H 2012), with a gloomier economic message already factored in by ECR contributors; in fact all 15 surveyed indicators for the UK have been downgraded in H1 2012. Unsurprisingly, the bank stability, economic-GNP outlook and employment/unemployment sub-factors are among those that have been downwardly revised the most.

According to Fraser Coutts, an Independent economic consultant, and one of ECR’s UK contributors, the GDP figures “put more pressure on the government and could lead to a triple-dip scenario after an Olympics-driven boost in Q3”.

“The deficit continues to be blown off course, particularly as the government hasn’t really got on with cutting public spending”. And there is a “greater risk of the coalition fracturing”, which is reflected in the UK’s government stability indicator scoring 7.5 (out of 10), down by 0.2 since January. It is the lowest-scoring of all six UK political risk factors, and is lower than the Dutch government stability assessment.

Yet the UK, on an overall score of 72.2, is firmly fixed in 18th place in ECR’s global rankings, below some of Europe’s safest sovereigns perhaps, but still considered a safer bet than France, which has fallen two places to 19th.

This article was originally published by Euromoney Country Risk.