With a flexible exchange rate, access to the European single market and an increasingly competitive corporate tax rate, the United Kingdom attracts a number of our clients. The country has one of the world's oldest and most entrenched parliamentary democracies, as well as strong institutional quality, and the protection of property rights, which remain highly appealing to foreign investors.
We ensure our clients make sound business decisions in the United Kingdom, using our risk-assessed total analysis model. Our research teams keep our clients informed of the latest market moves and political developments as part of our 'top-down' and 'bottom-up' perspective. Our expert views are supported by our interactive data and forecasting. We also provide in-depth analysis on 20 of the country’s most important industries. Our analysts will keep you ahead of the curve in the United Kingdom.
United Kingdom Country Risk
The UK economy outperformed most major developed states in 2015, and will continue to surpass the eurozone in 2016 and 2017
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.
Major Forecast Changes.
We have revised up our estimate for the UK's current account deficit to 4.4% of GDP, from 5.0% previously, on the back of stronger than expected growth in services exports and a narrowing in the primary account deficit.
Key Risks To Outlook
Downside Risks To Medium-Term Growth: There...
United Kingdom Industry Coverage (21)
United Kingdom Agribusiness
BMI View: To 2019, the UK will see steady production growth in barley, poultry and cheese. There will be strong export opportunities for grains and sugar to the Middle East and North Africa. In particular, the UK will be a leading sugar exporter among EU countries after the industry consolidates following the removal of production quotas in 2017.
|Agribusiness Market Value|
|BMI Market Value By Commodity (2011-2019)|
United Kingdom Autos
BMI View: The UK's passenger car market has become overheated and will shift into a period of anaemic growth over the remainder of our forecast period to 2019.
|Passenger Car and Light Commercial Vehicle Sales|
|f = BMI forecast. Source: Department For Transport, BMI|
Interest rate rises in 2016 and onwards will significantly impact consumer spending on vehicles given that UK households remain highly overleveraged and the car market...
United Kingdom Commercial Banking
|Date||Total assets||Client loans||Bond portfolio||Other||Liabilities and capital||Capital||Client deposits||...|
United Kingdom Consumer Electronics
BMI View: The UK is a large and lucrative consumer electronics market with high per capita device spending supported by the affluence of the local population and strong demand for the latest products. The growth outlook is, however, subdued due to the maturity of the market, meaning vendors are to a great extent reliant on replacement sales over the medium term. Population growth will provide some growth momentum, but the primary upside to our low-growth outlook is in device innovation, most notably wearables, though the first generation failed to gain mass market traction. We forecast total consumer electronics device spending in the UK will increase at a CAGR of 0.9% 2016-2019 to reach a total of USD50.7bn in 2019.
Latest Updates & Industry Developments
Computer Hardware Sales: USD27.3bn in 2016 to USD28.8bn in 2019, a CAGR of 0.9% in US dollar terms....
Defence & Security
United Kingdom Defence & Security
BMI expects the UK to spend up to USD75.3bn in 2015, up slightly from the estimated USD73.9bn expenditure of 2014. On average, between 2011 and 2014, the UK spent USD66.9bn annually on defence. For the duration of the forecast period, up to and including 2019, we expect the UK to spend an average of USD83.7bn on defence annually, with the budget increasing to USD92.1bn in 2019.
Our anticipated UK defence spending trends are significant as they show that the UK defence sector is once again growing after a period of contraction, in line with government initiatives to curb public spending. The London-based Royal United Services Institute (RUSI) warned in a report published in early September 2014 that the UK would miss key defence spending targets in 2015/16. In particular, the report warned that the UK could see the proportion of its GDP which it allocates to defence reducing to around 1.88% in 2015/16. Currently, only...
Food & Drink
United Kingdom Food & Drink
BMI View: The UK's economic recovery will continue to outpace the eurozone's for the foreseeable future, and we expect real GDP to grow by 2.4% in both 2016 and 2017. Although growth has been primarily driven by household consumption, fixed investment rates should begin to pick up over the coming quarters as capacity utilisation increases. Nonetheless, several risks remain; high household debt levels and a frothy housing market render household consumption vulnerable to interest rate shocks. As a result, we remain cautious about growth in the food and drink industry, especially in value terms, as competition for value and consumers' more careful spending habits will limit potential for the industry in the near term.
Headline Industry Data...
United Kingdom Freight Transport
Economy To Lift Freight Sector In 2015
The macro-economic outlook for the UK is moderately positive for the freight transport sector in 2015. We believe cargo volume growth will range from the low single percentage digits (road freight, air freight, some ports) to slightly higher levels, although also in single digit territory. Rail and some ports (notably Southampton but also Dover and Grimsby & Immingham) will grow at faster-than-GDP rates, while road haulage, airfreight, and a number of other ports will lag behind. We also note that UK real trade is expected to grow by 1.5%, also slower than GDP. Exports will lead the way (+1.6%) with imports growing by 1.3%.
With a couple of reservations, BMI is upbeat about prospects for the UK economy. In 2015 we are expecting GDP growth of 2.5%, after a particularly strong 2014, where we recently raised out estimate to 3.1%...
United Kingdom Information Technology
BMI View: We maintain a relatively robust growth outlook for UK IT spending over the medium term in the Q116 update, with spending growth expected to outperform most other developed European markets with a CAGR of 3.4% over 2016-2019. The stronger economic environment is a key differentiator with other Western European markets, while the large financial sector will also make the UK a lucrative market for advanced software and services vendors. Market development will however be uneven, and we envisage a stagnant hardware market, while growth will be driven by areas such as the app economy, cloud computing and emerging...
United Kingdom Infrastructure
BMI View : We maintain our forecasts for construction industry value real growth in the UK at 3.5% for 2016. Residential building will drive this growth, although we do not expect that government initiatives will boost output significantly. Several major infrastructure projects are yet to be fully factored into our forecasts due to slow progress on investment decisions, but already the UK has Europe's largest infrastructure project pipeline.
We forecast that the residential building market will remain buoyant - averaging real growth of 3.2% between 2016 and 2020....
United Kingdom Insurance
BMI View: On the whole, we anticipate that life insurance premium growth will be both more stable and profitable than in the non-life sector in the coming years. This is due primarily to the stability and strength of the underlying demographic life insurance drivers, which serve to insulate the sector from other macroeconomic or political influences. In the short term, the strength of the USD will reduce the trajectory of premiums when expressed in that currency. But the market's strengths will ultimately prevail and we expect life premiums to rise by nearly 7.5 annually through 2019. Non-life premiums are forecast to hover just below 1.5% annually. Continued consolidation is also expected, as market conditions foster greater...
United Kingdom Medical Devices
BMI View: The UK medical device market will continue to be one of the strongest performers in the region, with average US dollar growth of around 5% per annum forecast to 2019. The newly elected Conservative government has promised a minimum real terms increase in NHS funding in England over the next five years. Nevertheless, cost containment remains high on the agenda and efficiency measures will weigh on market growth.
|Total (USDmn)||Per Capita (USD)||...|
Oil & Gas
United Kingdom Oil & Gas
BMI View: While we see a provisional uptick in oil and gas production in the UK from 2015 onwards based on projects in the pipeline, the long-term trend remains one of stagnation given falling volumes from mature fields, a lack of significant new discoveries, falling oil prices and increasing exploration, production and operational costs in the region at a time when oil companies are seeking Capex cuts. While shale gas presents upside risk to gas production, this will not come online before the early 2020s at the earliest. Significant fiscal incentives put in place following the ongoing fiscal review provide some upside risk to our oil and gas production outlook past 2018/2019. However, further reforms and higher sustained oil prices will be necessary to realise...
United Kingdom Petrochemicals
BMI View: Above-trend growth is forecast for the British petrochemicals market, amid improved economic performance. However, a strong pound and a lack of competitiveness mean that British plastic and rubber output is down, thereby fuelling petrochemicals imports.
The British chemicals industry as a whole is in transition to higher-value, lower-volume production, having closed many basic chemicals and polymers capacities in recent years. This should put the industry in good stead for profitability, although existing petrochemicals facilities will continue to feel the challenge of feedstock prices in competing with US and Middle Eastern rivals. In 9M15, British chemicals output grew by an average of 6.1% y-o-y while rubber and plastic output declined 2.8%.
With no expectation of domestically available cheaper feedstock sources, petrochemicals capacities in the UK are likely...
Pharmaceuticals & Healthcare
United Kingdom Pharmaceuticals & Healthcare
BMI View : Sustained pharmaceutical and healthcare market growth in the UK will create improved opportunities for drugmakers over the next 10 years. Despite pressure on revenues due to cost containment measures, the adoption of health innovations will continue to be a competing policy priority, as illustrated by the recent creation of a market access office under the National Institute for Health and Care Excellence to facilitate the domestic diffusion of new health products, as well as the use of different financing mechanisms to ensure access to value-adding innovations. Meanwhile, the robust R&D base in the country will continue to attract investment in biotechnologies and next-generation treatments, including through increasing collaborations between...
United Kingdom Power
BMI View: Plans to phase out the UK's remaining coal-fired power capacity by 2025 cement the decline of coal, which is already occurring due to tightening EU emissions directives, the UK's carbon price floor and a sustained period of lower gas prices. The biggest challenge when removing coal from the energy mix will be mobilising investment into replacement gas capacity, which will certainly require reform of the UK's capacity mechanism.
United Kingdom Real Estate
BMI View : With economic growth broadening out to the UK regions, we expect rental rates to grow across all three commercial real estate market sub-sectors we cover in 2016. Investors' desire to capture growth and secure higher returns should keep demand for property in which to invest high. There are still opportunities to take on development risk in the regions and suburban London.
UK economic growth slowed slightly in Q315, expanding by 0.5%, down from 0.7% in Q215. A contraction in manufacturing and construction output was the main factor in this slower growth. Meanwhile, the services sector has continued to be the key driver of economic expansion. Business confidence has increased following the decisive outcome in the May 2015 general election, ending months of uncertainty. Consumer confidence is also improving, and with unemployment continuing to trend down...
United Kingdom Renewables
BMI View: We expect growth in the British non-hydropower renewables segment to slow down over our 10-year forecast period, as widespread subsidy cuts and heightened policy uncertainty will lower the attractiveness of the market. The austere energy policy that is being rolled out by the new Conservative majority government will therefore lead to a tougher environment for renewable energy in the UK over the next five years, and as DECC states that the spending under the LCF is already over budget for the next five years, we see little room for deviation from austerity policy.
United Kingdom Retail
BMI View: While the outlook for the UK economy is stronger than the rest of the eurozone, with consumption benefitting from lower fuel prices, two major developments will curb the outlook for retailers in 2016. We believe that interest rates will begin to rise in 2016, and this will have a disproportionately large impact on UK consumers, due to the high cost of housing in the country, resulting in households potentially diverting earnings away from discretionary spending in preparation for higher mortgage servicing costs. Secondly, retailers will be faced by increased costs in the form of the government's national living wage, which is set to come into force from...
United Kingdom Telecommunications
BMI View: Consolidation measures will lead to fiercer competition and improved LTE development as growth in the UK telecoms sector will be driven by a higher uptake of advanced data services and quad-play technologies. The UK mobile market stands on the threshold of wide-scale consolidation as deals between BT and EE, and Hutchison and O2 remain in the works. However, the European Commission (EC) launching an investigation into the merger of 3 and O2 could cloud this outlook, if the merger is ultimately blocked.
The UK mobile market declined 0.1% y-o-y in Q3 2015, as Hutchison and O2 added new clients.
The share of non-DSL connections (...
United Kingdom Tourism
BMI View: The UK has a large and well-established tourism industry, welcoming high volumes of international visitors alongside an extensive domestic travel market. Although growth in tourism arrivals will remain relatively low over our five-year forecast period to 2019, visitor numbers are already very high, and the hotel industry is expected to record healthy increases in value throughout. The country's extensive transport infrastructure and openness to foreign investment also serve to make the UK a highly attractive prospect for tourism-related investment.
United Kingdom Water
BMI View: The UK water sector will go from strength to strength over the coming years as modernisations and expansion continue to improve an already robust and efficient industry. Slight problems with pollution and water losses are in the process of being rectified, and the expansion of the network and the growing demand for water have led to our forecast rise in extraction and consumption levels. We see significant opportunities for both services and infrastructure groups.
The four nations of the UK have top of the range water sectors. Infrastructure and technology are among the best in Europe and those responsible for the sectors appear keen to maintain the high standards and develop the sectors for the future. In England and Wales this task falls to private companies, with both sectors being fully privatised. This has...