Credit rating agency S&P Global is becoming more positive about the UK now that the country has reorganized its budget. S&P raised expectations to ‘stable’ from ‘negative’ previously.

The credit rating agency gave the rating after the poorly received mini-budget from the government of former Prime Minister Liz Truss. He wanted to borrow money to lower taxes, which caused a jolt in financial markets and government bonds which were much more expensive. The chaos eventually led to Truss’ forced departure.

Stable fiscal policy

Under his successor Rishi Sunak, the aim was once again to pursue a stable fiscal policy in which expenses are covered by tax revenues. S&P appreciates that. The fact that UK energy support for companies and households was cheaper than expected and expectations that the biggest near-term risks to the UK economy have disappeared also helped rating agencies with a brighter outlook.

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S&P expects improved relations with the European Union to help the UK economy grow more in the medium term. As a result, the UK government debt may start to shrink again from next year. But the UK government’s situation is not one of luxury and less money coming in or more costly measures could affect its ability to respond in crisis situations. On the other hand, the credit rating could rise further if the UK economy grows faster than expected.