Fitch keeps UK outlook negative, debt at AA-
WASHINGTON: Fitch ratings maintained Britain’s AA- debt rating and outlook at negative, but warned rising deficits, the coronavirus surge and its fraught trading relationship with Europe pose risks.
The affirmed negative outlook “reflects the impact of the coronavirus pandemic on the UK economy and the resulting material deterioration in the public finances,” with the agency saying in a statement the deficit widened to 16.2 percent last year. London’s recent trade deal with the European Union following its departure from the bloc “should limit disruption at borders in the short term,” Fitch said, but warned “uncertainty remains around how the new trade arrangement will work in practice and how it will affect the UK’s trade with the EU over time.”
The rollout of vaccines against COVID-19 could spark a “sustained recovery” beginning in the second half of 2021, and Fitch raised the year’s GDP growth forecast to 5.0 percent from its previous 4.1 percent, citing the free trade agreement. But the agency warned of a “weak” shortterm economic outlook, as Britain grapples with surging virus cases.
Earlier this month, London imposed a lockdown and ordered the public to stay at home and work remotely, if possible, and only to go out for essential shopping, medical reasons or to exercise.
That will cause the economy to contract three percent in the first quarter of this year, but Fitch said its recovery in the second quarter could be stronger than before thanks to the new trade deal.
Brexit red tape
German logistics company DB Schenker is temporarily suspending deliveries from the European Union to Britain because of bureaucratic hurdles brought on by Brexit. The transport giant is experiencing “considerable problems” in customs formalities in the movement of goods between the UK and EU, it said in a statement sent to AFP on Friday.
Only “around 10 percent” of deliveries are accompanied by the complete and correct paperwork, it added. DB Schenker, owned by Germany’s state-owned rail giant Deutsche Bahn, said it has staff specially trained to deal with Brexit issues but “every shipment that is not properly documented delays the delivery of entire loads”. Shipments that are not fully declared cannot be delivered, it said.
The company expects a further increase in the volume of shipments in January, but said it “will only be able to process these quickly if the proportion of deliveries with complete paperwork increases significantly.” “Both the sender and the recipient have a duty to provide compliant documents for this purpose.”
It said deliveries already posted will continue to be transported as quickly as possible.
The post-Brexit trade agreement concluded on Christmas Eve ended the free movement of goods between the EU and Britain. The French parcel delivery service DPD said earlier in January that it was suspending deliveries from Britain to EU countries for a few days.
It said it needed time to adjust to the “new, more complex procedures” for passing through customs because of Brexit. DB Schenker handles around half a million shipments from continental Europe to the UK every year.