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At around 80%, the United Kingdom has the highest share of services in value added among the G10 economies, owing mainly to especially strong growth in the past in business and financial services output.

  • Forecasts

    After Brexit, the BoE will likely restart QE and seek to lower rates but as inflation moves visibly above target, rate hikes will move back into view. UK assets may attract a risk premium and GBP will remain weak. download »
  • FX Notes

    GBP is very low at present but there are significant uncertainties about the post-EU economic environment and the external balance. Resolving these uncertainties could take some time. download »
  • Focus Notes

    Through QE, central banks have expanded their government debt holdings. Were purchases maintained in Japan and in the euro area, debt sustainability would improve sharply in less than a decade. download »
  • Economics

    • GDP growth has fallen due to weaker investment and inventory changes. Inflation is a bit below target; wage growth is moderate despite low unemployment. The external deficit is large; the fiscal deficit has widened. download »
  • Markets

    • GBP is up but still below its real mean. Markets price in a fair chance of one 25bp rate cut by Q3 2020. Yields are only slightly above their lows and spreads have remained stable. Equities have outperformed. download »
  • Investing

    • Policy may ease to support activity, but inflation may drive rates up in time. Bond yields may rise prior to short rates and if UK risk premia rises. GBP may stay weak until comprehensive trading arrangements emerge. download »