Credit Benchmark’s UK Default Risk Outlook draws on an extensive database of over 105,000 unique Consensus Credit Ratings (CCRs). These Consensus Credit Ratings represent the internal risk views of expert analysts at the world’s leading banks – a previously untapped source of risk intelligence. 90% of the entities with Consensus Credit Ratings are not rated by a major credit rating agency, meaning these projections offer a new and significant capacity for analysing default risk.
Although this report focuses on UK Industries, the methodology can be applied to the broad and highly representative dataset of 105,000+ Consensus Credit Ratings (see here for Default Risk Outlook on US Industries and here for EU Industries). The probability of default projections can be customized for our clients to match their own classification schemas and align more accurately with their portfolios and exposures.
Vigilant risk management is vital when navigating an unpredictable economic climate. With broader, deeper, and more frequent analytics than previously available, Credit Benchmark is now able to offer the market a comprehensive and differentiated view on default risks.
If you would like a free and fully confidential analysis of the default risk projections of your own portfolio, we encourage you to get in touch here.
Credit default risk for UK companies is expected to plateau by mid-2025. The UK’s new Labour administration faces tight fiscal limits, but it has so far passed the currency and bond market credibility test. Andy Haldane of the FT expects an influx of international capital, responding to political uncertainty in the US and EU. Former Governor of the Bank of England Mark Carney has outlined a revised public-private partnership model under Labour’s National Wealth Fund, proposing a 25% Public / 75% Private funding split. Part of this is intended to bring long term investors (pension funds and insurance companies) into national infrastructure projects. Reform of planning laws will aim to tackle the chronic UK housing shortage which is good volume news for housebuilders, but margins may be thinner. With no quick fix for the NHS – other than pay rises – current broader Health Care sector trends are likely to continue.
The credit impact of these changes will take time to unfold. Some sectors – Railways and the Utilities – face major restructuring, with possible public ownership, and these are excluded from this report. More broadly, the new administration sees a need for sustained private sector investment; aiming for positive long-term results at the cost of short-term balance sheet strains.
Without significantly lower interest rates coming into play, the 1-year credit outlook still forecasts a modest increase in UK Corporate default rates. Current projections show that default risk will decrease for only 18% of the 134 UK sectors tracked by Credit Benchmark in the next 12 months. This report highlights that the most vulnerable industries are those with global drivers: Basic Materials, Technology, and Telecoms. The major domestic groupings – Corporates, Industrials and Financials – show modest deterioration, while Consumer, Healthcare and Oil & Gas sectors show little change. The final section of this report lists the top 10 improving and deteriorating sectors; detailed analysis for these is available on request.
Credit Benchmark’s projected default rate for Q1 2025
Change (%) in the probability of default (PD) during 2024/25
^ Default Risk is defined as a weighted average of S&P long-term observed default rates in each rating category, using the monthly sector credit breakdown as weights derived from contributed bank data.
Labour policies likely to favour growth but may heighten inflation risks. Default risks to rise in H2 2024 but stabilise by mid-2025.
Projected 2024 default rate distribution
Deteriorations vs improvements % of total
Distribution by rating category (%)
Distribution by rating category (%)
* Covering all corporate sectors, including those discussed in this report, but excluding financial institutions.
^ Default Risk is defined as a weighted average of S&P long-term observed default rates in each rating category, using the monthly sector credit breakdown as weights derived from contributed bank data.
Default risks set to rise as heavily indebted borrowers face rollover challenges; backdrop of global regulatory change, possible rate cuts and UK investment boom should limit any deterioration.
Projected 2024 default rate distribution
Deteriorations vs improvements % of total
Distribution by rating category (%)
Projected change in credit distribution (%)
^ Default Risk is defined as a weighted average of S&P long-term observed default rates in each rating category, using the monthly sector credit breakdown as weights derived from contributed bank data.
Default Risk outlook stable; but GB Energy plan will bring opportunities and risks for private energy majors. Current trends are skewed more to increase than decrease.
Projected 2024 default rate distribution
Deteriorations vs improvements % of total
Distribution by rating category (%)
Projected change in credit distribution (%)
^ Default Risk is defined as a weighted average of S&P long-term observed default rates in each rating category, using the monthly sector credit breakdown as weights derived from contributed bank data.
Default rates to rise nearly 10% over next 12 months, but early investment boom could mitigate.
Projected 2024 default rate distribution
Deteriorations vs improvements % of total
Distribution by rating category (%)
Projected change in credit distribution (%)
* Covering the manufacture of industrial goods and services, e.g., constructions materials, aerospace, electronic equipment and components, defense equipment, railroads, marine transportation, industrial machinery, commercial vehicles and trucks, etc.
^ Default Risk is defined as a weighted average of S&P long-term observed default rates in each rating category, using the monthly sector credit breakdown as weights derived from contributed bank data.
Significant increase (16%) in default risks expected by mid-2025 as EIU expects China/US growth to ease while UK, Japan and EU take up some but not all slack.
Projected 2024 default rate distribution
Deteriorations vs improvements % of total
Distribution by rating category (%)
Projected change in credit distribution (%)
* Covering the mining industries for aluminum, iron, steel, coal, gold platinum and precious metals, non-ferrous metals, as well as forestry and paper products.
^ Default Risk is defined as a weighted average of S&P long-term observed default rates in each rating category, using the monthly sector credit breakdown as weights derived from contributed bank data.
Consumer Goods show a modest increase in default rates; but could overshoot. Post-election policies unlikely to have immediate material impact.
Projected 2024 default rate distribution
Deteriorations vs improvements % of total
Distribution by rating category (%)
Projected change in credit distribution (%)
^ Default Risk is defined as a weighted average of S&P long-term observed default rates in each rating category, using the monthly sector credit breakdown as weights derived from contributed bank data.
Consumer Services at risk of modest deterioration in 2025 but – unlike Consumer Goods – there is a material chance of improvement.
Projected 2024 default rate distribution
Deteriorations vs improvements % of total
Distribution by rating category (%)
Projected change in credit distribution (%)
^ Default Risk is defined as a weighted average of S&P long-term observed default rates in each rating category, using the monthly sector credit breakdown as weights derived from contributed bank data.
Projected 2024 default rate distribution
Deteriorations vs improvements % of total
Distribution by rating category (%)
Projected change in credit distribution (%)
^ Default Risk is defined as a weighted average of S&P long-term observed default rates in each rating category, using the monthly sector credit breakdown as weights derived from contributed bank data.
Sector needs major infrastructure and funding overhaul; global move to satellite suggests credit challenges persisting in 2025.
Projected 2024 default rate distribution
Deteriorations vs improvements % of total
Distribution by rating category (%)
Projected change in credit distribution (%)
^ Default Risk is defined as a weighted average of S&P long-term observed default rates in each rating category, using the monthly sector credit breakdown as weights derived from contributed bank data.
NHS reforms will take time to benefit private suppliers, but some private care providers may benefit from ability-to-pay approach.
Projected 2024 default rate distribution
Deteriorations vs improvements % of total
Distribution by rating category (%)
Projected change in credit distribution (%)
^ Default Risk is defined as a weighted average of S&P long-term observed default rates in each rating category, using the monthly sector credit breakdown as weights derived from contributed bank data.
| Largest Deterioration (Default Rate increase >+10%) |
| Household Goods & Home Construction |
| Food & Drug Retailers |
| Real Estate Holding & Development |
| Chemicals |
| Industrial Machinery |
| Media |
| Hotels |
| Building Materials & Fixtures |
| Computer Services |
| Construction & Materials |
Home Construction will continue to be hit by higher mortgage rates, with some resets only now making an impact (planning reform should be a boost to the sector longer term, but meeting housebuilding targets runs the risk of lower margins.)
Real Estate generally – especially Offices – is also expected to continue to suffer, along with Household Goods, Building Materials, and Construction Materials.
Other discretionary spending sectors – Media and Hotels – are expected to continue to deteriorate along with essentials such as Food & Drug Retailers.
Chemicals, Industrial Machinery, and Computer Services are likely to be medium-term beneficiaries of a pro-investment policy stance.
| Largest Improvement (Default Rate increase <0%) |
| Aerospace & Defence |
| Insurance |
| Specialty Finance |
| Pharmaceuticals & Biotechnology |
| Beverages |
| Restaurants & Bars |
| Automobiles & Parts |
| Travel & Leisure |
| Oil & Gas Producers |
| Broadline Retailers |
A limited number of sectors are projected to show modest default rate improvements over the next 12 months. Geopolitics will continue to drive improvement in Aerospace and Defence.
Spending habits focused on small tickets will support hospitality and leisure segments, while insurance continues to benefit from harder rates in Property & Casualty lines.
Specialty Finance is at the core of the Private Credit boom – attracting additional funding as well as increased regulator scrutiny.
AI is helping Pharma & Biotech to shorten development cycles.
Plans to tackle climate change are still in direct conflict with the immediate demand for petrol-driven transport; Oil & Gas and Autos & Parts are forecast to see default risk improvements into 2025.
Contact Credit Benchmark for more details on any of these sectors.
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Additional definitions and explanations
The proportion of sector borrowers projected to be in the “c” category by H1 2025. The majority of defaulting borrowers will transition from this category.
The rolling 12m net balance of deteriorations vs improvements (“DIN”) across all credit categories in each sector, projected to the end of H1 2025. This is used to weight peak and trough transition matrices as a function of the sector credit cycle phase.
The modelled default rate projected directly to end H1 2025.
Industry credit “betas” estimated from historical long run relationships with the Corporate index, and then projected as a function of the Corporate Index projections. This provides an element of consistency and anchoring across the otherwise independently projected industries.
