European Economic Perspectives: UK & France: Fiscal risk scenarios

Research evidence excerpt

European Economic Perspectives: UK & France: Fiscal risk scenarios

Global Research

14 July 2026ab

European Economic Perspectives Economics

Europe including UKUK & France: Fiscal risk scenarios

Anna Titareva

Economist

UK & France - a tough balance of fiscal constraints and politics anna.titareva@ubs.com

+44-20-7568 5083

The UK and France share several commonalities at the current juncture: (1) Both have

among the weakest fiscal positions in Europe (Figure 1DebtanddeficitacrostheEUandG7(2025)). High government debt, Felix Huefner

Economistpersistent budget deficits, and growing spending pressures are testing both

felix.huefner@ubs.com

governments’ ability to maintain credible fiscal trajectories. (2) Both have political +49-69-1369 8280

challenges ahead with important elections in France in 2027 and leadership change in

the UK. And (3) both have experienced intense market pressure at times in the past Mustafa Oguz Caylan

Strategist

when these fiscal and political risks coincided (UK mini-budget in 2022 and the French

mustafa.caylan@ubs.com

snap elections in 2024) (Figure 2UKgiltyieldsandFrenchOATvsGermanbundspreads). In this note, we focus on the fiscal aspects: we update +44-20-7901 5203

our debt sustainability models for both countries and stress test the debt trajectories. We

also outline the key signposts for the political landscape in each country and include Reinhard Cluse

views from the rates strategy perspective.

reinhard.cluse@ubs.com

+44-20-7568 6722

Debt ratios on upward trajectories - consolidation is key challenge

Franziska Fischer

Official debt projections and budget plans show debt/GDP declining over coming years Economist

in both countries. We show that these plans rest on optimistic assumptions, notably as franziska.fischer@ubs.com