It is perhaps a minor detail in the blossoming rapprochement between London and EU capitals, but such detail is more illuminating than the stale invective over Brexit in the Westminster media. The larger story is that Britain is no longer being treated – or behaving – as a secessionist apostate. The logic of mutual interest is reasserting itself.
The Windsor Framework has been the clincher, draining poison from relations with Brussels and Washington alike. This has turbo-charged a ‘rerating’ of UK Inc in the minds of global investors and economists that has already been underway for several months – even if the International Monetary Fund has yet to smell the coffee.
Standard & Poor’s upgraded the UK’s sovereign debt rating on Friday from negative watch to stable AA, citing both the Windsor accord and Rishi Sunak’s fiscal cleansing. It is becoming clearer that last year’s catastrophism was greatly overblown.
The agency said the budget deficit will average 3.7pc of GDP over 2023-2025 rather than the earlier forecast of 5.5pc. The debt ratio will start falling from a peak of 97.7pc as soon as this year. It will not keep rising relentlessly through the 2020s as the IMF suggests. S&P said the energy price cap would cost nothing beyond mid-2023.
The Office for National Statistics said this week that government borrowing was £13.2bn lower than originally thought for the 2022-2023 financial year.
Revised ONS data also show that economic output is above pre-pandemic levels, though one continues to hear the uncorrected claim that the UK is the only G7 country still trailing this miserable milestone. The picture is poor but not so different from the sluggish performance of Germany and Japan. Overall, the UK’s economic growth since the referendum has been roughly the same as German growth.
Nor is investment as bad as we thought. Charts are still circulating that purport to show business investment a long way below 2016 levels. Again, revised ONS figures show that is not the case. Gross fixed capital formation (GFCF) is significantly higher than in 2016. Furthermore, it is running at 18.7pc of GDP, above its 25-year average.
