Default, Transition, and Recovery: 2023 United Kingdom Corporate Default And Rating Transition Study

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Sector Credit Markets Research Default Transition & Recovery
Topic Confronting Credit Headwinds

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Table of Contents

Five UK Defaults in 2023

S&P Global Ratings' United Kingdom corporate default tally (including financial and nonfinancial sectors) fell slightly to five in 2023, down from six in 2022(see chart 1). This resulted in an overall default rate of 1.3%, higher than the long-term weighted average of 1% per year. The highest recorded default rate for U.K. issuers was in 2020, when 3.2% of all ratings defaulted (14 defaults total in 2020, one of which was unrated at the start of the year).

Historically, U.K. defaults have been almost exclusively speculative grade, with an average annual investment grade default rate since 1991 of 0.04%, compared with a long-term average speculative-grade default rate of 3.7% (see table 1). There has not been an investment grade default in the U.K. since 2009.

Below are key observations from our review of U.K. corporate defaults and rating transitions in 2023:

No single sector had more than one default (see table 2).
Distressed exchanges accounted for four defaults, with one Chapter 11 filing.
None of the 2023 defaulters were originally rated investment-grade: one was initially rated 'BB'.
Toro Private Holdings (Travelport) had the highest defaulting debt amount, at $3.7 billion.
We estimate the volume of outstanding debt associated with U.K. corporate defaulters in 2023 was $5.3 billion.
The U.K. speculative-grade corporate default rate fell to 2.6% in 2023 from 3.1% in 2022.
The speculative-grade U.K. default rate was lower in 2023 than both the US (4.5%) and Europe, excluding the UK (3.8%, see Chart 2).
The average time to default in 2023 from the initial rating was 4.8 years.
At year-end 2023, speculative-grade issuers accounted for 48% of all U.K. corporate ratings, lower than 50% at the end of 2022, and up from 45.3% at the end of 2009 (see chart 3).
No U.K. corporate entities that we rated higher than 'B-' at the beginning of 2023 defaulted during the year.

Chart 1

Table 1

United Kingdom corporate default summary
Year	Total defaults*	Investment grade defaults	Speculative grade defaults	Default rate (%)	Investment grade default rate (%)	Speculative grade default rate (%)	Total debt outstanding (Bil. $)
1991	0	0	0	0.00	0.00	N/A
1992	0	0	0	0.00	0.00	N/A
1993	0	0	0	0.00	0.00	N/A
1994	0	0	0	0.00	0.00	N/A
1995	0	0	0	0.00	0.00	0.00
1996	0	0	0	0.00	0.00	0.00
1997	0	0	0	0.00	0.00	0.00
1998	0	0	0	0.00	0.00	0.00
1999	2	0	2	1.04	0.00	7.41
2000	1	0	1	0.46	0.00	3.03
2001	7	1	6	3.10	0.52	17.14
2002	8	1	5	2.47	0.48	13.89
2003	4	0	3	1.21	0.00	8.33
2004	1	0	1	0.40	0.00	2.70
2005	0	0	0	0.00	0.00	0.00
2006	2	0	2	0.78	0.00	5.13
2007	2	0	2	0.77	0.00	5.00
2008	1	0	1	0.39	0.00	2.78
2009	5	1	2	1.18	0.47	4.88
2010	0	0	0	0.00	0.00	0.00
2011	0	0	0	0.00	0.00	0.00
2012	2	0	1	0.36	0.00	1.49
2013	2	0	2	0.70	0.00	2.63
2014	2	0	2	0.62	0.00	1.82
2015	5	0	4	1.08	0.00	2.70
2016	6	0	6	1.56	0.00	3.73
2017	7	0	6	1.60	0.00	3.75
2018	7	0	6	1.56	0.00	3.51
2019	5	0	5	1.23	0.00	2.65
2020	14	0	13	3.22	0.00	6.77
2021	2	0	2	0.52	0.00	1.08
2022	6	0	6	1.57	0.00	3.11	8.8
2023	5	0	5	1.31	0.00	2.62	5.3
Average	3	0	3	0.82	0.04	3.66
Median	2	0	2	0.62	0.00	2.70
Std. Dev.	3	0	3	0.88	0.14	4.02
Min	0	0	0	0.00	0.00	0.00
Max	14	1	13	3.22	0.52	17.14
* This column includes companies that were no longer rated at the time of default. Source: S&P Global Ratings Credit Research & Insights, S&P Global Market Intelligence's CreditPro®

Table 2

2023 publicly rated United Kingdom corporate defaults
Company name	Reason for default	Country	Industry	Debt Amt. (Mil.$)	Default date	Rating 1 year prior to default	Rating 3 years prior to default	First rating	Date of first rating
Missouri TopCo Ltd.	Distressed exchange	U.K.	Consumer/service sector	349.0	1/31/2023	CCC+	-	CCC-	8/6/2020
Toro Private Holdings I, Ltd.	Distressed exchange	U.K.	Transportation	3,680.0	3/31/2023	CCC+	-	CCC+	10/2/2020
Venator Materials PLC	Chapter 11	U.K.	Health care/chemicals	975.0	5/18/2023	B-	B-	B-	4/24/2020
Praesidiad Group Ltd.	Distressed exchange	U.K.	Aerospace/automotive/capital goods/metal	293.5	11/28/2023	CCC+	CCC+	B	11/28/2017
Tullow Oil PLC	Distressed exchange	U.K.	Energy and natural resources	0.0	12/5/2023	B-	CCC+	BB	10/25/2013
		Total		5,297
*Table does not include confidentially rated defaulters or their associated debt amounts. Initial ratings for these companies are those immediately following a prior distressed exchange. Health/chem = Healthcare/Chemicals, Aero/auto/CG/metal = Aerospace/automotive/capital goods/metal, High tech = High technology/computers/office equipment, Forest products = Forest and building products/homebuilders, Cons/service = Consumer/service sector E & NR = Energy and Natural Resources. Administration = Admin, Chapter 11 = Ch. 11, Chapter 15 = Ch. 15, Distressed Exchange = Dist. Ex., Foreign Bankruptcy = F. Bank, Missed Interest = Missed, Missed Principal = Missed, Missed Principal/Interest = Missed, Payment Suspension = Susp., Receivership = Rec., Regulatory Directive = Reg. Dir. Source: S&P Global Ratings Credit Research & Insights, S&P Global Market Intelligence's CreditPro®

In aggregate, credit quality improved in 2023, with upgrades reaching 10.4% (6.8% in 2022) against a 6.8% (4.2% in 2022) downgrade rate, and the ratio of downgrades to upgrades was below one for the second consecutive year, following four straight years of declining credit quality (see table 3). Our credit ratings continue to be effective indicators of relative creditworthiness. The one-year Gini coefficient--a measure of the rank-ordering power of ratings--for U.K. corporate issuers, was 93% in 2023. From 1981 to 2023, the one-year weighted average Gini coefficient was 88%, the three-year average was 82%, and the five-year average was 75%.

We base this study on our public and confidential issuer credit ratings on both nonfinancial and financial companies, but we exclude credit estimates--typically based on private information received from investors--that were quite common prior to the global financial crisis. We include the United Kingdom (as well as associated tax havens: The British Virgin Islands, The Channel Islands, Jersey, and Guernsey) industrials, utilities, financial institutions--including banks, brokerages, asset managers, and other financial entities--and insurance companies.

We base our calculations of default and transition rates on the number of issuer credit ratings instead of the affected debt volumes. Where we refer to the weighted average values of certain statistics across different periods, we weight the statistics for each period by the number of issuer credit ratings outstanding at the beginning of each period. More details on our calculation approaches and the terminology we use in this study are in Appendix 1. Further details on the Gini coefficient methodology are in Appendix 2.

Table 3

Summary of United Kingdom corporate rating activity (%)*
Year	Issuers	Upgrades (%)	Downgrades** (%)	Defaults (%)	Withrawn ratings (%)	Changed ratings (%)	Unchanged ratings (%)	Downgrade/ upgrade ratio***
1991	50	2.00	26.00	0.00	0.00	28.00	72.00	13.00
1992	60	0.00	15.00	0.00	3.33	18.33	81.67
1993	71	2.82	7.04	0.00	2.82	12.68	87.32	2.50
1994	83	3.61	13.25	0.00	4.82	21.69	78.31	3.67
1995	102	7.84	14.71	0.00	0.00	22.55	77.45	1.88
1996	117	8.55	16.24	0.00	4.27	29.06	70.94	1.90
1997	137	6.57	10.95	0.00	6.57	24.09	75.91	1.67
1998	159	3.14	12.58	0.00	4.40	20.13	79.87	4.00
1999	192	6.77	15.63	1.04	8.85	32.29	67.71	2.31
2000	216	5.56	22.22	0.46	6.94	35.19	64.81	4.00
2001	226	6.19	17.70	3.10	10.18	37.17	62.83	2.86
2002	243	4.53	18.11	2.47	8.64	33.74	66.26	4.00
2003	247	4.05	21.46	1.21	6.07	32.79	67.21	5.30
2004	249	3.21	7.23	0.40	8.43	19.28	80.72	2.25
2005	257	6.61	9.73	0.00	9.34	25.68	74.32	1.47
2006	257	7.00	9.34	0.78	7.00	24.12	75.88	1.33
2007	261	7.66	10.73	0.77	9.58	28.74	71.26	1.40
2008	254	6.69	21.65	0.39	6.30	35.04	64.96	3.24
2009	255	2.75	20.00	1.18	10.20	34.12	65.88	7.29
2010	248	6.45	11.29	0.00	5.24	22.98	77.02	1.75
2011	267	8.24	12.36	0.00	8.24	28.84	71.16	1.50
2012	279	5.73	12.90	0.36	5.38	24.37	75.63	2.25
2013	284	5.99	9.15	0.70	6.69	22.54	77.46	1.53
2014	321	5.61	5.92	0.62	5.61	17.76	82.24	1.06
2015	369	4.34	11.38	1.08	6.78	23.58	76.42	2.63
2016	384	9.38	12.24	1.56	11.72	34.90	65.10	1.31
2017	376	8.51	7.98	1.60	9.57	27.66	72.34	0.94
2018	384	6.77	9.11	1.56	8.07	25.52	74.48	1.35
2019	405	6.91	7.90	1.23	8.40	24.44	75.56	1.14
2020	404	1.98	17.82	3.22	7.92	30.94	69.06	9.00
2021	385	5.97	7.27	0.52	8.83	22.60	77.40	1.22
2022	383	6.79	4.18	1.57	6.27	18.80	81.20	0.62
2023	383	10.44	6.79	1.31	7.31	25.85	74.15	0.65
Weighted Average		6.13	11.95	1.04	7.53	26.65	73.35	2.48
Average		5.72	12.90	0.82	6.78	26.23	73.77	2.84
Median		6.19	12.24	0.62	6.94	25.52	74.48	1.89
Std. Dev.		2.35	5.40	0.88	2.71	6.00	6.00	2.63
Min		0.00	4.18	0.00	0.00	12.68	62.83	0.62
Max		10.44	26.00	3.22	11.72	37.17	87.32	13.00
* This table compares the net change in ratings from the first to the last day of each year. All intermediate ratings are disregarded. Excludes downgrades to D, shown separately in the default column. *Downgrades to 'D' excluded in this metric. Source: S&P Global Ratings Credit Research & Insights, S&P Global Market Intelligence's CreditPro®

Table 4

Annual United Kingdom corporate default rates by rating modifier (%)
	AAA	AA+	AA	AA-	A+	A	A-	BBB+	BBB	BBB-	BB+	BB	BB-	B+	B	B-	CCC/C
1981	N/A	N/A	0.00	N/A	N/A	0.00	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A
1982	0.00	N/A	0.00	N/A	0.00	0.00	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A
1983	0.00	N/A	0.00	N/A	0.00	0.00	0.00	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A
1984	0.00	N/A	0.00	N/A	0.00	0.00	0.00	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A
1985	0.00	0.00	0.00	0.00	0.00	0.00	0.00	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A
1986	0.00	0.00	0.00	N/A	0.00	0.00	0.00	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A
1987	0.00	0.00	0.00	0.00	N/A	0.00	0.00	N/A	0.00	N/A	N/A	N/A	N/A	0.00	N/A	N/A	N/A
1988	0.00	0.00	0.00	0.00	N/A	0.00	0.00	N/A	0.00	N/A	N/A	N/A	N/A	0.00	N/A	N/A	N/A
1989	0.00	0.00	0.00	0.00	N/A	N/A	0.00	N/A	0.00	N/A	N/A	N/A	N/A	0.00	N/A	N/A	N/A
1990	0.00	0.00	0.00	0.00	0.00	0.00	0.00	N/A	N/A	N/A	N/A	N/A	N/A	0.00	N/A	N/A	N/A
1991	0.00	0.00	0.00	0.00	0.00	0.00	0.00	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A
1992	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A
1993	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A
1994	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A
1995	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	N/A	N/A	N/A	N/A	0.00	N/A	0.00	N/A
1996	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	N/A	N/A	0.00	0.00	N/A
1997	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	N/A	0.00	0.00	N/A
1998	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	N/A	0.00	0.00	0.00	0.00	N/A	N/A
1999	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	N/A	0.00	0.00	0.00	25.00	0.00	50.00
2000	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	33.33	0.00
2001	0.00	0.00	0.00	0.00	0.00	2.94	0.00	0.00	0.00	0.00	0.00	0.00	14.29	6.67	50.00	50.00	50.00
2002	0.00	0.00	0.00	0.00	0.00	0.00	0.00	2.70	0.00	0.00	0.00	0.00	18.18	0.00	0.00	0.00	100.00
2003	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	N/A	100.00
2004	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	50.00
2005	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
2006	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	12.50	0.00	33.33
2007	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	14.29	33.33
2008	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	14.29	N/A
2009	0.00	0.00	0.00	0.00	0.00	2.63	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	20.00	25.00
2010	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
2011	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
2012	N/A	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	50.00
2013	N/A	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	5.56	0.00	0.00	50.00
2014	N/A	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	2.63	6.25	0.00
2015	N/A	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	1.79	4.76	18.18
2016	N/A	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	3.64	5.26	18.75
2017	N/A	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	5.26	25.00
2018	N/A	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	9.09	28.57
2019	N/A	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	4.55	0.00	3.70	27.27
2020	N/A	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	4.00	0.00	1.54	7.89	53.33
2021	N/A	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	6.90
2022	N/A	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	4.65	18.18
2023	N/A	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	2.50	21.05
Average	0.00	0.00	0.00	0.00	0.00	0.13	0.00	0.08	0.00	0.00	0.00	0.00	1.35	0.54	3.47	6.71	31.62
Median	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	2.50	26.14
Std. Dev.	0.00	0.00	0.00	0.00	0.00	0.60	0.00	0.48	0.00	0.00	0.00	0.00	4.39	1.70	10.49	11.61	27.88
Min	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
Max	0.00	0.00	0.00	0.00	0.00	2.94	0.00	2.70	0.00	0.00	0.00	0.00	18.18	6.67	50.00	50.00	100.00
Source: S&P Global Ratings Credit Research & Insights, S&P Global Market Intelligence's CreditPro®

Chart 2

Chart 3

Recent Defaults Remain Low, Despite Speculative-Grade Growth

The count of active corporate ratings in the U.K. has increased noticeably since the financial crisis, in large part driven by the increase in new issuers (see chart 4 and table 5). Of note, new speculative-grade issuers have comprised most of the annual totals since 2010. For the purposes of our default studies, we consider issuers who have re-emerged from a prior default as a new issuer once they receive their post-default rating. Many new issuers in table 5 are the result of a completed distressed exchange, particularly at the lowest rating levels.

Chart 4

Table 5

Rating classification of new United Kingdom corporate ratings*
	First Rating
Year	AAA	AA	A	BBB	BB	B	CCC/C	Total	% IG	% SG
1981	1	0	0	0	0	0	0	1	100.0	0.0
1982	0	0	1	0	0	0	0	1	100.0	0.0
1983	2	0	1	0	0	0	0	3	100.0	0.0
1984	1	2	0	0	0	0	0	3	100.0	0.0
1985	0	1	2	0	0	0	0	3	100.0	0.0
1986	2	0	0	1	0	0	0	3	100.0	0.0
1987	2	2	0	0	0	0	0	4	100.0	0.0
1988	1	3	0	0	0	0	0	4	100.0	0.0
1989	1	5	3	0	0	0	0	9	100.0	0.0
1990	5	6	7	0	0	0	0	18	100.0	0.0
1991	1	3	4	2	0	0	0	10	100.0	0.0
1992	1	5	6	1	0	0	0	13	100.0	0.0
1993	1	3	9	1	0	0	0	14	100.0	0.0
1994	1	4	10	2	0	3	0	20	85.0	15.0
1995	0	4	4	2	2	1	0	13	76.9	23.1
1996	2	2	15	4	2	0	0	25	92.0	8.0
1997	0	6	10	9	3	3	0	31	80.6	19.4
1998	1	6	12	4	5	12	0	40	57.5	42.5
1999	0	4	18	6	6	7	0	41	68.3	31.7
2000	0	3	9	7	3	2	0	24	79.2	20.8
2001	1	8	17	14	6	1	0	47	85.1	14.9
2002	1	1	11	5	5	8	0	31	58.1	41.9
2003	0	0	4	8	5	2	0	19	63.2	36.8
2004	3	0	9	5	7	5	0	29	58.6	41.4
2005	0	1	3	8	2	10	0	24	50.0	50.0
2006	1	2	5	6	3	5	1	23	60.9	39.1
2007	0	5	5	1	3	4	0	18	61.1	38.9
2008	0	2	6	5	5	3	0	21	61.9	38.1
2009	0	0	7	7	1	7	1	23	60.9	39.1
2010	0	0	3	5	4	18	1	31	25.8	74.2
2011	0	0	3	8	9	14	1	35	31.4	68.6
2012	0	0	4	3	3	10	2	22	31.8	68.2
2013	0	0	7	7	7	33	4	58	24.1	75.9
2014	0	2	5	8	5	44	2	66	22.7	77.3
2015	0	0	2	7	13	21	2	45	20.0	80.0
2016	0	0	4	6	3	25	3	41	24.4	75.6
2017	0	0	1	9	10	28	1	49	20.4	79.6
2018	0	2	3	9	11	35	1	61	23.0	77.0
2019	0	0	4	2	4	27	5	42	14.3	85.7
2020	0	2	0	3	3	15	6	29	17.2	82.8
2021	0	0	1	1	8	21	2	33	6.1	93.9
2022	0	0	1	2	3	21	1	28	10.7	89.3
2023	0	0	3	2	0	10	4	19	26.3	73.7
Total	28	84	219	170	141	395	37	1074	46.6	53.4
* Includes issuers that are assigned a new rating after default as well as those companies that receive a rating for the first time. Source: S&P Global Ratings Credit Research & Insights, S&P Global Market Intelligence's CreditPro®

Since no sector had more than one default in 2023, the sector level default rates are most interesting for their historical rates (see table 6), with the highest historical weighted average default rates in the energy and natural resources sector (3.7%, with most defaults between 2015 and 2020) and telecommunications (3.4%, with most defaults between 2000 and 2004).

Table 6

Annual United Kingdom corporate default rates by industry (%)
Year	Aerospace / automotive / capital goods / metal	Consumer / service sector	Energy and natural resources	Financial Institutions	Forest and building products / homebuilders	Health care / chemicals	High technology / computers / office equipment	Insurance	Leisure time / media	Real estate	Telecommunications	Transportation	Utility
1991	0.00	0.00	0.00	0.00	N/A	0.00	N/A	0.00	0.00	N/A	N/A	N/A	0.00
1992	0.00	0.00	0.00	0.00	0.00	0.00	N/A	0.00	0.00	N/A	N/A	0.00	0.00
1993	0.00	0.00	0.00	0.00	0.00	0.00	N/A	0.00	0.00	N/A	N/A	0.00	0.00
1994	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	N/A	N/A	0.00	0.00
1995	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	N/A	N/A	0.00	0.00
1996	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	N/A	N/A	0.00	0.00
1997	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	N/A	0.00	0.00	0.00
1998	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	N/A	0.00	0.00	0.00
1999	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	N/A	0.00	20.00	0.00
2000	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	14.29	0.00	0.00
2001	11.11	0.00	0.00	0.00	0.00	8.33	0.00	2.86	9.52	0.00	12.50	0.00	0.00
2002	0.00	3.33	0.00	0.00	0.00	0.00	0.00	3.33	5.88	0.00	28.57	0.00	1.61
2003	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	20.00	7.14	1.67
2004	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	1.64
2005	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
2006	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	12.50	7.14	0.00
2007	6.25	4.76	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
2008	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	7.14	0.00
2009	0.00	0.00	0.00	2.00	25.00	0.00	0.00	0.00	6.25	0.00	0.00	0.00	0.00
2010	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
2011	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
2012	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	4.35	0.00	0.00	0.00	0.00
2013	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	4.17	0.00	0.00	8.33	0.00
2014	0.00	2.38	4.76	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
2015	0.00	0.00	11.54	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	6.25	0.00
2016	4.17	0.00	18.18	1.54	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
2017	0.00	1.75	5.00	1.56	0.00	14.29	0.00	0.00	0.00	0.00	10.00	0.00	0.00
2018	0.00	3.64	5.00	3.03	0.00	0.00	0.00	0.00	2.13	0.00	0.00	0.00	0.00
2019	4.35	5.00	0.00	0.00	0.00	0.00	0.00	0.00	2.00	0.00	0.00	0.00	0.00
2020	3.85	6.45	18.18	0.00	0.00	0.00	6.67	0.00	4.44	0.00	0.00	7.14	0.00
2021	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	18.18	0.00
2022	0.00	1.79	4.76	0.00	0.00	0.00	5.26	0.00	7.14	0.00	0.00	0.00	0.00
2023	3.70	1.61	5.56	0.00	0.00	3.45	0.00	0.00	0.00	0.00	0.00	8.33	0.00
Weighted Average	1.35	1.39	3.68	0.35	0.69	1.04	1.30	0.17	1.74	0.00	3.40	3.22	0.20
Average	1.01	0.93	2.21	0.25	0.78	0.79	0.40	0.19	1.39	0.00	3.62	2.80	0.15
Median	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
Std. Dev.	2.46	1.76	4.87	0.71	4.42	2.88	1.52	0.75	2.60	0.00	7.54	5.27	0.48
Min	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
Max	11.11	6.45	18.18	3.03	25.00	14.29	6.67	3.33	9.52	0.00	28.57	20.00	1.67
Includes investment-grade and speculative-grade rated entities. Source: S&P Global Ratings Credit Research & Insights, S&P Global Market Intelligence's CreditPro®

The financial services sector has had very few defaults in the U.K. (see table 7). The last default in this sector was in 2018, when Brighthouse Group PLC defaulted. For non-financial issuers, overall default rates across various time horizons at year-end 2023 are above historical averages, largely reflecting the growing composition of speculative grade credits.

Table 7

Cumulative United Kingdom corporate default rates by sector (%)
	Financial Institutions			Insurance			All Financials			All Nonfinancials
Year	One-Year	Three-Year	10-Year	One-Year	Three-Year	10-Year	One-Year	Three-Year	10-Year	One-Year	Three-Year	10-Year
1991	0.00	N/A	N/A	0.00	N/A	N/A	0.00	N/A	N/A	0.00	N/A	N/A
1992	0.00	N/A	N/A	0.00	N/A	N/A	0.00	N/A	N/A	0.00	N/A	N/A
1993	0.00	0.00	N/A	0.00	0.00	N/A	0.00	0.00	N/A	0.00	0.00	N/A
1994	0.00	0.00	N/A	0.00	0.00	N/A	0.00	0.00	N/A	0.00	0.00	N/A
1995	0.00	0.00	N/A	0.00	0.00	N/A	0.00	0.00	N/A	0.00	0.00	N/A
1996	0.00	0.00	N/A	0.00	0.00	N/A	0.00	0.00	N/A	0.00	0.00	N/A
1997	0.00	0.00	N/A	0.00	0.00	N/A	0.00	0.00	N/A	0.00	0.00	N/A
1998	0.00	0.00	N/A	0.00	0.00	N/A	0.00	0.00	N/A	0.00	0.00	N/A
1999	0.00	0.00	N/A	0.00	0.00	N/A	0.00	0.00	N/A	1.63	0.00	N/A
2000	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.69	2.13	0.00
2001	0.00	0.00	0.00	2.86	2.70	0.00	1.37	1.45	0.00	3.92	5.69	0.00
2002	0.00	0.00	0.00	3.33	5.41	0.00	1.47	2.78	0.00	2.86	7.64	0.00
2003	0.00	0.00	0.00	0.00	5.71	5.00	0.00	2.74	3.03	1.71	10.46	0.00
2004	0.00	0.00	0.00	0.00	3.33	4.17	0.00	1.47	2.13	0.57	5.14	1.82
2005	0.00	0.00	0.00	0.00	0.00	3.85	0.00	0.00	1.89	0.00	2.29	3.13
2006	0.00	0.00	0.00	0.00	0.00	3.13	0.00	0.00	1.69	1.12	1.14	3.85
2007	0.00	0.00	0.00	0.00	0.00	5.88	0.00	0.00	3.08	1.17	1.10	7.45
2008	0.00	0.00	0.00	0.00	0.00	5.41	0.00	0.00	2.90	0.61	2.23	12.20
2009	2.00	2.33	0.00	0.00	0.00	5.41	1.03	1.11	2.78	1.27	2.92	11.11
2010	0.00	2.17	0.00	0.00	0.00	5.71	0.00	1.10	2.74	0.00	1.84	12.42
2011	0.00	2.00	0.00	0.00	0.00	3.33	0.00	1.03	1.47	0.00	1.27	6.29
2012	0.00	0.00	2.38	0.00	0.00	0.00	0.00	0.00	1.39	0.54	0.65	4.00
2013	0.00	0.00	2.38	0.00	0.00	0.00	0.00	0.00	1.37	1.08	0.58	2.27
2014	0.00	0.00	2.38	0.00	0.00	0.00	0.00	0.00	1.32	0.94	2.15	1.66
2015	0.00	0.00	2.50	0.00	0.00	0.00	0.00	0.00	1.28	1.54	3.76	3.35
2016	1.54	0.00	2.33	0.00	0.00	0.00	0.88	0.00	1.11	1.85	3.76	3.51
2017	1.56	1.64	2.17	0.00	0.00	0.00	0.96	0.92	1.10	1.84	5.00	3.07
2018	3.03	3.08	2.00	0.00	0.00	0.00	1.87	1.75	1.03	1.44	4.44	2.53
2019	0.00	3.13	0.00	0.00	0.00	0.00	0.00	1.92	0.00	1.67	5.15	1.96
2020	0.00	3.03	0.00	0.00	0.00	0.00	0.00	1.87	0.00	4.33	5.78	4.62
2021	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.70	5.69	7.53
2022	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	2.07	6.67	8.06
2023	0.00	0.00	1.69	0.00	0.00	0.00	0.00	0.00	0.93	1.73	4.53	9.86
Average	0.25	0.56	0.74	0.19	0.55	1.74	0.23	0.59	1.30	1.07	2.97	4.61
Median	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	1.30	0.94	2.23	3.43
Std. Dev.	0.71	1.09	1.08	0.75	1.54	2.38	0.52	0.88	1.07	1.11	2.71	3.88
Min	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
Max	3.03	3.13	2.50	3.33	5.71	5.88	1.87	2.78	3.08	4.33	10.46	12.42
Note: All Financials refers to financial institutions and insurance combined. Source: S&P Global Ratings Credit Research & Insights, S&P Global Market Intelligence's CreditPro®

Cumulative Default Rates Rise With Relative Credit Risk

Our default studies all show a clear negative correspondence between ratings and defaults: The higher the issuer credit rating, the lower the observed default frequency, and vice versa. This relationship holds over time (see chart 5 and tables 8-9). On average, from 1981 to 2023, U.K. corporate issuers rated in the 'AA' category had a 0% default rate in the following three years, a 0.1% default rate in the fourth year, rising to a 0.6% default rate by the ninth year. By comparison, issuers rated in the 'B' category recorded, on average, default rates of 2% in the first year, 5.7% in the second, and 9% in the third.

Chart 5

Table 8

Comparison of Corporate cumulative average default rates, 1981-2023 (%)
United Kingdom	From/To	Y1	Y2	Y3	Y4	Y5	Y6	Y7	Y8	Y9	Y10
	AAA	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
	AA	0.00	0.00	0.00	0.10	0.20	0.31	0.41	0.52	0.63	0.63
	A	0.07	0.15	0.26	0.42	0.63	0.80	0.98	1.03	1.03	1.03
	BBB	0.05	0.19	0.40	0.46	0.51	0.58	0.64	0.72	0.80	0.88
	BB	0.50	1.83	2.71	3.66	4.71	5.50	6.38	6.87	7.44	8.07
	B	2.13	5.74	9.08	11.89	14.00	15.66	17.27	18.29	18.90	19.41
	CCC/C	25.64	36.51	42.46	45.85	48.60	49.63	49.63	49.63	49.63	49.63
	Investment Grade	0.05	0.13	0.26	0.37	0.50	0.62	0.74	0.81	0.85	0.87
	Speculative Grade	3.51	6.92	9.60	11.78	13.54	14.83	16.05	16.79	17.34	17.87
	All Rated	1.02	2.00	2.78	3.39	3.90	4.27	4.61	4.80	4.93	5.03
Global	From/To	Y1	Y2	Y3	Y4	Y5	Y6	Y7	Y8	Y9	Y10
	AAA	0.00	0.03	0.13	0.23	0.34	0.44	0.49	0.57	0.62	0.68
	AA	0.02	0.05	0.11	0.19	0.28	0.38	0.46	0.53	0.60	0.67
	A	0.05	0.12	0.20	0.30	0.41	0.53	0.68	0.80	0.93	1.07
	BBB	0.14	0.39	0.67	1.02	1.38	1.73	2.03	2.33	2.62	2.90
	BB	0.57	1.79	3.19	4.58	5.88	7.08	8.12	9.08	9.93	10.69
	B	2.98	6.99	10.55	13.44	15.75	17.60	19.05	20.20	21.23	22.19
	CCC/C	25.97	35.93	41.40	44.47	46.64	47.67	48.76	49.45	50.05	50.62
	Investment Grade	0.08	0.22	0.38	0.58	0.78	0.99	1.18	1.37	1.54	1.72
	Speculative Grade	3.52	6.77	9.56	11.83	13.70	15.22	16.47	17.51	18.43	19.27
	All Rated	1.49	2.89	4.11	5.13	5.99	6.70	7.29	7.80	8.25	8.66
Source: S&P Global Ratings Credit Research & Insights, S&P Global Market Intelligence's CreditPro®

Table 9

United Kingdom corporate cumulative average default rates by rating modifier, 1981 to 2023 (%)
	Time horizon
Rating	Y1	Y2	Y3	Y4	Y5	Y6	Y7	Y8	Y9	Y10
AAA	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
AA+	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
AA	0.00	0.00	0.00	0.25	0.51	0.76	1.02	1.28	1.55	1.55
AA-	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
A+	0.00	0.00	0.16	0.16	0.16	0.16	0.16	0.16	0.16	0.16
A	0.20	0.41	0.52	0.63	0.75	0.99	1.24	1.37	1.37	1.37
A-	0.00	0.00	0.10	0.40	0.83	1.05	1.27	1.27	1.27	1.27
BBB+	0.11	0.34	0.84	0.97	0.97	1.13	1.30	1.48	1.67	1.88
BBB	0.00	0.14	0.14	0.14	0.30	0.30	0.30	0.30	0.30	0.30
BBB-	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
BB+	0.00	0.00	0.47	0.47	0.47	1.11	1.87	2.72	2.72	2.72
BB	0.00	0.89	0.89	1.39	1.39	1.39	2.06	2.06	2.89	3.84
BB-	1.27	4.02	5.92	8.04	10.89	12.48	13.66	14.31	15.07	15.93
B+	0.84	2.59	5.01	6.59	8.27	8.63	9.43	9.85	9.85	10.37
B	1.21	3.72	6.48	9.71	12.05	14.32	16.34	18.00	19.56	20.30
B-	5.20	13.07	18.84	22.62	24.95	27.65	30.06	31.05	31.05	31.05
CCC/C	25.64	36.51	42.46	45.85	48.60	49.63	49.63	49.63	49.63	49.63
Investment Grade	0.05	0.13	0.26	0.37	0.50	0.62	0.74	0.81	0.85	0.87
Speculative Grade	3.51	6.92	9.60	11.78	13.54	14.83	16.05	16.79	17.34	17.87
All Rated	1.02	2.00	2.78	3.39	3.90	4.27	4.61	4.80	4.93	5.03
Source: S&P Global Ratings Credit Research & Insights, S&P Global Market Intelligence's CreditPro®

Rating Actions And Transitions Consistent With Global Trends

Typically, nonfinancial companies have had higher credit deterioration than financial services companies in a given year, and this remained true in 2023 (see chart 6). This is largely because nonfinancial companies typically have more ratings at the lowest end of speculative grade, which are downgraded and default at higher frequency than higher rated issuers.

Generally, U.K. investment-grade companies tend to have greater credit stability (as measured by the frequency of rating transitions) than their speculative-grade counterparts. In 2023, 95% of U.K. corporate entities rated 'A' at the beginning of the year were still rated in that category at the end of the year, whereas the comparable measure for companies rated in the 'B' category was 81% (see table 10).

Chart 6

Table 10

2023 Corporate transition rates: United Kingdom versus global
United Kingdom	From/To	AAA	AA	A	BBB	BB	B	CCC/C	D	NR
	AAA	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
	AA	0.00	88.89	0.00	0.00	0.00	0.00	0.00	0.00	11.11
	A	0.00	1.32	94.74	1.32	0.00	0.00	0.00	0.00	2.63
	BBB	0.00	0.00	1.87	91.59	0.93	0.00	0.00	0.00	5.61
	BB	0.00	0.00	0.00	6.78	79.66	5.08	0.00	0.00	8.47
	B	0.00	0.00	0.00	0.00	1.77	80.53	7.08	0.88	9.73
	CCC/C	0.00	0.00	0.00	0.00	0.00	31.58	31.58	21.05	15.79
Global	From/To	AAA	AA	A	BBB	BB	B	CCC/C	D	NR
	AAA	100.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
	AA	0.00	96.81	1.42	0.00	0.00	0.00	0.00	0.00	1.77
	A	0.00	0.15	96.79	1.02	0.00	0.00	0.00	0.00	2.04
	BBB	0.00	0.00	1.61	92.59	1.02	0.43	0.11	0.11	4.14
	BB	0.00	0.00	0.17	3.92	85.42	3.75	0.33	0.17	6.25
	B	0.00	0.00	0.00	0.10	4.29	78.96	5.89	1.24	9.51
	CCC/C	0.00	0.00	0.00	0.00	0.00	7.32	47.56	30.79	14.33
Source: S&P Global Ratings Credit Research & Insights, S&P Global Market Intelligence's CreditPro®

The 2023 pattern generally correlates with the long-term ratings behavior trend among all global rated issuers. This study--in line with our previous default studies--confirms that higher ratings are generally more stable than lower ratings. On average, of all the U.K. corporate issuers we rated in the 'A' category, 88% retained ratings in the same category after one year, whereas only 74% of those rated in the 'B' category remained in the same rating category a year later (see table 11). Lower ratings also tend to be less stable than higher ratings over multiyear timeframes (see table 12).

The transitions at the rating modifier level (including the "plus" or "minus" identifiers) also generally have the same relationship, although differences in sample sizes occasionally create slight variations between adjacent rating levels (see table 13).

Table 11

One-year weighted-average transition rates (%)
United Kingdom	From/To	AAA	AA	A	BBB	BB	B	CCC/C	D	NR
	AAA	82.87	13.26	1.10	0.00	0.00	0.00	0.55	0.00	2.21
		21.74	20.25	3.21	0.00	0.00	0.00	3.33	0.00	9.04
	AA	0.30	85.60	10.16	0.20	0.00	0.00	0.00	0.00	3.75
		1.59	8.96	8.57	1.00	0.00	0.00	0.00	0.00	4.33
	A	0.04	1.53	88.03	5.47	0.18	0.07	0.00	0.07	4.60
		0.18	3.05	6.82	4.29	0.59	0.76	0.00	0.27	2.82
	BBB	0.00	0.09	2.89	88.16	2.19	0.09	0.09	0.05	6.43
		0.00	0.37	3.13	6.26	2.33	0.37	0.39	0.27	3.79
	BB	0.00	0.00	0.12	3.71	77.35	6.06	0.37	0.50	11.88
		0.00	0.00	0.45	3.86	10.48	5.00	1.27	2.02	7.43
	B	0.00	0.00	0.00	0.00	3.52	73.72	6.31	2.13	14.32
		0.00	0.00	0.00	0.00	4.41	9.76	4.37	2.29	7.76
	CCC/C	0.00	0.00	0.00	0.51	0.00	11.79	45.64	25.64	16.41
		0.00	0.00	0.00	1.55	0.00	13.35	23.21	19.64	16.48
Global	From/To	AAA	AA	A	BBB	BB	B	CCC/C	D	NR
	AAA	87.26	8.94	0.51	0.03	0.10	0.03	0.05	0.00	3.08
		7.36	7.16	0.81	0.13	0.26	0.17	0.34	0.00	2.45
	AA	0.46	87.62	7.57	0.45	0.05	0.06	0.02	0.02	3.76
		0.53	5.16	4.20	0.66	0.18	0.20	0.06	0.07	1.71
	A	0.02	1.50	89.22	4.72	0.24	0.10	0.01	0.05	4.13
		0.08	1.06	3.98	2.21	0.37	0.23	0.06	0.10	1.67
	BBB	0.00	0.07	3.08	87.13	3.28	0.41	0.09	0.14	5.79
		0.03	0.14	1.60	4.03	1.65	0.63	0.19	0.23	1.48
	BB	0.01	0.02	0.10	4.46	78.58	6.39	0.52	0.57	9.34
		0.05	0.08	0.23	1.91	4.60	3.09	0.66	0.77	2.16
	B	0.00	0.02	0.06	0.15	4.46	75.02	4.85	2.98	12.46
		0.00	0.07	0.18	0.19	2.03	3.80	2.63	2.91	2.30
	CCC/C	0.00	0.00	0.08	0.14	0.43	13.33	44.98	25.97	15.07
		0.00	0.00	0.36	0.55	0.81	7.39	8.44	11.65	4.51
Note: Numbers in parentheses are weighted standard deviations. Source: S&P Global Ratings Credit Research & Insights, S&P Global Market Intelligence's CreditPro®

Table 12

Three-year weighted-average corporate transition rates (%)
United Kingdom	From/To	AAA	AA	A	BBB	BB	B	CCC/C	D	NR
	AAA	54.14	34.25	4.97	0.00	0.00	0.00	0.55	0.00	6.08
		29.64	27.48	8.67	0.00	0.00	0.00	3.74	0.00	12.46
	AA	0.80	62.55	24.80	1.00	0.10	0.00	0.10	0.00	10.64
		4.05	13.65	11.60	1.71	0.51	0.00	0.51	0.00	8.10
	A	0.08	3.48	67.97	13.68	0.43	0.15	0.15	0.27	13.79
		0.32	4.83	12.20	6.01	0.76	0.82	0.50	0.56	4.44
	BBB	0.00	0.31	7.39	69.29	4.60	0.72	0.00	0.41	17.27
		0.00	0.73	5.57	11.41	2.96	1.04	0.00	1.48	6.89
	BB	0.00	0.00	0.44	8.15	47.74	9.46	0.73	2.91	30.57
		0.00	0.00	0.81	7.84	14.70	4.53	2.44	6.46	14.34
	B	0.00	0.00	0.00	0.18	6.14	36.58	8.51	9.39	39.21
		0.00	0.00	0.00	0.87	4.71	10.84	4.55	6.90	11.42
	CCC/C	0.00	0.00	0.00	0.65	0.00	11.69	10.39	43.51	33.77
		0.00	0.00	0.00	2.40	0.00	14.98	14.99	20.08	19.69
Global	From/To	AAA	AA	A	BBB	BB	B	CCC/C	D	NR
	AAA	65.94	21.92	2.29	0.31	0.21	0.08	0.10	0.13	9.03
		11.93	12.14	1.68	0.75	0.46	0.29	0.41	0.36	5.27
	AA	1.06	67.83	17.90	1.87	0.31	0.19	0.02	0.11	10.70
		0.87	9.39	6.08	1.43	0.49	0.43	0.07	0.18	3.76
	A	0.05	3.52	71.74	10.84	1.01	0.36	0.07	0.20	12.21
		0.09	2.18	7.66	3.00	1.01	0.56	0.13	0.26	3.48
	BBB	0.01	0.22	7.62	67.66	6.46	1.34	0.23	0.69	15.76
		0.05	0.36	2.99	7.77	2.07	1.23	0.33	0.87	3.17
	BB	0.01	0.04	0.40	10.11	50.01	10.99	1.11	3.25	24.08
		0.05	0.12	0.63	3.50	7.80	2.69	0.83	3.23	3.44
	B	0.00	0.02	0.15	0.60	8.80	42.79	5.41	10.82	31.41
		0.04	0.09	0.39	0.71	3.56	4.96	2.01	6.69	4.60
	CCC/C	0.00	0.00	0.09	0.42	1.36	16.49	10.46	41.50	29.68
		0.00	0.00	0.42	1.03	1.45	6.69	5.55	12.17	7.54
Note: Numbers in parentheses are weighted standard deviations. Source: S&P Global Ratings Credit Research & Insights, S&P Global Market Intelligence's CreditPro®

Table 13

One-year weighted-average transition rates for United Kingdom corporates by rating modifier, 1981-2023, (%)
	Rating
From/To	AAA	AA+	AA	AA-	A+	A	A-	BBB+	BBB	BBB-	BB+	BB	BB-	B+	B	B-	CCC	D	NR
AAA	82.87	11.05	1.66	0.55	0.55	0.55	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.55	0.00	2.21
	21.74	17.66	4.47	3.33	2.61	2.02	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	3.33	0.00	9.04
AA+	1.86	73.91	13.04	6.21	0.62	0.62	0.62	0.00	0.00	0.62	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	2.48
	10.06	23.82	14.30	12.67	2.75	2.95	3.20	0.00	0.00	2.95	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	6.14
AA	0.00	1.50	80.25	7.75	5.00	1.00	0.25	0.25	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	4.00
	0.00	3.56	16.27	9.83	10.38	3.23	1.38	1.24	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	5.70
AA-	0.00	0.22	3.97	75.28	14.35	1.55	0.66	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	3.97
	0.00	1.30	5.74	12.75	11.68	2.84	2.28	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	7.26
A+	0.00	0.00	0.73	4.06	76.05	10.89	2.76	0.29	0.15	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	5.08
	0.00	0.00	1.96	7.99	16.48	10.78	4.17	1.04	0.77	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	5.14
A	0.00	0.30	0.00	0.51	3.86	78.35	8.33	2.03	0.81	0.10	0.10	0.10	0.00	0.20	0.00	0.00	0.00	0.20	5.08
	0.00	1.47	0.00	3.41	4.69	11.74	7.19	3.59	1.58	0.61	0.54	0.54	0.00	1.95	0.00	0.00	0.00	0.73	4.86
A-	0.09	0.00	0.09	0.00	0.28	4.50	79.85	8.34	1.78	0.94	0.19	0.00	0.09	0.00	0.00	0.00	0.00	0.00	3.84
	0.42	0.00	0.44	0.00	3.83	4.97	11.30	7.33	4.69	1.51	0.74	0.00	0.58	0.00	0.00	0.00	0.00	0.00	3.94
BBB+	0.00	0.00	0.00	0.00	0.00	0.99	4.51	80.64	6.16	1.65	0.11	0.44	0.11	0.00	0.00	0.00	0.11	0.11	5.17
	0.00	0.00	0.00	0.00	0.00	4.36	4.04	11.53	5.41	2.70	0.46	1.14	0.57	0.00	0.00	0.00	0.54	0.54	3.29
BBB	0.00	0.00	0.13	0.00	0.13	0.13	0.92	6.06	79.58	5.01	0.40	0.53	0.00	0.00	0.13	0.00	0.13	0.00	6.85
	0.00	0.00	1.05	0.00	0.70	0.62	2.59	8.20	11.05	5.56	1.00	1.20	0.00	0.00	0.70	0.00	1.05	0.00	6.67
BBB-	0.00	0.00	0.21	0.00	0.21	0.21	0.21	0.63	7.32	75.73	5.23	1.05	0.84	0.00	0.21	0.00	0.00	0.00	8.16
	0.00	0.00	1.14	0.00	1.75	1.63	1.46	1.59	7.01	14.13	7.63	2.46	2.55	0.00	1.39	0.00	0.00	0.00	7.47
BB+	0.00	0.00	0.00	0.00	0.40	0.00	0.00	0.00	0.00	10.40	66.80	7.60	2.80	1.60	0.40	0.00	0.00	0.00	10.00
	0.00	0.00	0.00	0.00	1.35	0.00	0.00	0.00	0.00	9.83	19.25	9.07	7.30	6.36	1.90	0.00	0.00	0.00	13.39
BB	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.41	0.00	1.24	9.09	63.64	6.61	2.48	0.83	0.00	0.83	0.00	14.88
	0.00	0.00	0.00	0.00	0.00	0.00	0.00	3.76	0.00	4.27	9.96	17.21	7.91	5.02	2.88	0.00	3.74	0.00	17.18
BB-	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	1.27	7.28	67.41	7.59	2.85	0.95	0.32	1.27	11.08
	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	3.71	9.42	17.44	7.47	4.73	2.63	1.10	4.04	9.00
B+	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.28	2.80	8.68	57.42	10.64	1.96	2.24	0.84	15.13
	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	1.06	8.58	7.59	16.13	8.10	3.46	4.11	2.03	13.17
B	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.15	0.00	0.76	5.16	63.73	11.53	3.34	1.21	14.11
	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	1.39	0.00	2.18	6.29	14.61	7.27	3.66	3.78	9.12
B-	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.58	6.07	58.09	16.18	5.20	13.87
	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	1.06	6.72	16.88	11.54	5.93	12.99
CCC/C	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.51	0.00	0.00	0.00	0.00	0.00	0.00	11.79	45.64	25.64	16.41
	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	1.55	0.00	0.00	0.00	0.00	0.00	0.00	13.35	23.21	19.64	16.48
Note: Numbers in parentheses are weighted standard deviations. Source: S&P Global Ratings Credit Research & Insights, S&P Global Market Intelligence's CreditPro®

Time To Default Shows Strong, Positive Relationship With Rating Quality

Higher-rated corporate entities generally default over a longer time than their lower-rated counterparts when using the original ratings as the reference points (see table 14). U.K. corporate entities that we initially rated in the 'B' category, but that later defaulted, took an average of 4 years to default--less than the average of 5.9 years for defaulting entities we originally rated in the 'A' category. For the corporate entitiess that defaulted in 2023, an average of 4.8 years elapsed between the initial rating date and the default date, slightly more than the long-term average of 4.3 years.

Table 14

Time to default from original rating for United Kingdom corporate defaulters
Original rating	Defaults	Average years from original rating*	Median years from original rating	St. Dev. of years from original rating
AAA	N/A	N/A	N/A	N/A
AA	1	8.42	8.42	N/A
A	6	5.94	6.17	1.20
BBB	2	6.73	6.73	5.20
BB	18	6.21	5.29	4.46
B	55	4.00	3.43	2.27
CCC/C	14	1.20	1.22	0.88
Total	96	4.23	3.34	3.09
* Or Dec. 31, 1980, whichever is greater. N/A—Not available. Source: S&P Global Ratings Credit Research & Insights, S&P Global Market Intelligence's CreditPro®

For the entire long-term history of U.K. corporate defaults (91 for 1981-2023), the average time to default across all rating categories was 4.3 years, compared with 5.9 years globally (see chart 7). The relationship between the initial rating and the time to default is less clear in the U.K. partly because of smaller sample sizes. In the 43 years ended in 2023, 1,885 companies with initial ratings in the 'B' category defaulted globally, but only 53 were from the U.K.

As expected, the average time to default for post-original ratings (excluding initial ratings) also shows that higher-rated corporate issuers generally take longer to default. However, the time to default is somewhat shorter than from initial ratings (see chart 8).

Chart 7

Chart 8

Gini Coefficients And Lorenz Curves

A quantitative analysis of ratings performance shows that our U.K. corporate ratings continue to correlate with the level of default risk across different time periods.

To measure ratings performance, we plot the cumulative share of defaulters against the cumulative share of issuers by rating in a Lorenz curve, which visually represents the ratings' rank-ordering power and is summarized quantitatively by the Gini coefficient (see definitions and methodology in Appendix II).

Over the long term, the U.K. corporate weighted average one-year Gini coefficient was 88%, the three-year average was 82%, and the five-year average was 79% (see table 15 and charts 9-11).

Table 15

Corporate gini coefficients by region (%)
		Time Horizon
Region		One-Year	Three-Year	Five-Year	Seven-Year
Global	Weighted Ave.	82.63	75.17	71.66	69.18
	Average	85.57	78.74	74.58	71.58
	StDev	(5.37)	(5.00)	(5.23)	(5.20)
U.S.	Weighted Ave.	80.51	72.40	68.86	66.35
	Average	84.52	76.58	72.13	68.99
	StDev	(6.68)	(6.43)	(6.43)	(6.03)
Europe ex UK	Weighted Ave.	90.58	86.19	84.47	82.20
	Average	90.90	87.75	84.35	81.17
	StDev	(6.24)	(5.29)	(5.20)	(5.07)
United Kingdom	Weighted Ave.	88.33	82.33	78.51	74.62
	Average	90.17	84.27	78.27	72.56
	StDev	(10.23)	(11.02)	(11.37)	(13.07)
**Note: Numbers in parentheses are standard deviations. Average and Standarad deviations for Europe are from 1996-2023. Source: S&P Global Ratings Credit Research & Insights, S&P Global Market Intelligence's CreditPro®

The Gini coefficients decline as the time frame lengthens because longer times allow for more opportunities for credit degradation among higher-rated entities. In the one-year Lorenz curve for U.K. corporate issuers, for example, 97% of defaults were in speculative-grade rating categories, while the speculative-grade segment accounted for only 28% of all U.K. corporate issuers (see chart 8).

The five-year Lorenz curve shows speculative-grade issuers accounted for 89% of defaulters and only 23% of the entire sample (see chart 10). If the rank ordering of ratings had little predictive value, the cumulative share of defaulting entities and the cumulative share of all entities would be nearly the same, producing a Gini coefficient close to zero.

Chart 9

Chart 10

Chart 11

Appendix I: Calculation Approach And Definitions

This long-term corporate default and rating transition study uses S&P Global Market Intelligence's CreditPro® database of long-term local currency issuer credit ratings. The analysis excludes public information (pi) ratings and ratings based on the guarantee of another company or government entity. We also do not include short-term issuer credit ratings. We do not require all issuers with debt that we rate to have an issuer credit rating. Therefore, if an issuer has rated debt but not an issuer credit rating, we assign a proxy rating so the CreditPro® corporate dataset accurately represents the complete universe of ratings. The local currency senior unsecured rating is the preferred debt rating used for the proxy because this rating is usually consistent with the issuer credit rating. In a small number of cases, we use the subordinated debt rating or the senior secured rating as the proxy.

An issuer credit rating is a forward-looking opinion about an obligor's overall creditworthiness. This opinion focuses on the obligor's capacity and willingness to meet its financial commitments as they come due. It does not apply to any specific financial obligation because it does not take into account the nature and provisions of any single obligation, its standing in bankruptcy or liquidation, statutory preferences, or the legality and enforceability of the obligation. Issuer credit ratings can be either long-term or short-term.

Our ongoing enhancement of the database used to generate this study could lead to outcomes that differ to some degree from those reported in previous studies. However, each annual default and transition study reports statistics back to Dec. 31, 1980, and is therefore self-contained and effectively supersedes all previous editions.

Issuers included in this study

This study analyzes the rating histories of 956 UK companies that we rated as of Dec. 31, 1980, or that we first rated between that date and Dec. 31, 2023. These include industrials, utilities, financial institutions, and insurance companies in the region with long-term local currency ratings. Structured finance vehicles, public-sector issuers, and sovereign issuers are the subjects of separate default and transition studies, and we exclude them from this study.

To avoid overcounting, we exclude subsidiaries with debt that is fully guaranteed by a parent or with default risk that we consider identical to that of a parent. The latter case arises for companies with obligations that are not legally guaranteed by a parent but that have operating or financing activities that are so entwined with those of the parent that a default of one and not the other would be highly unlikely, in our view. At times, however, a parent's guarantee might not have yet covered some of these subsidiaries, or the relationship that combines the default risk of parent and subsidiary might have come to an end or might not have begun. We include such subsidiaries in the dataset for the period during which they had distinct and separate risk of default.

Issuers with withdrawn ratings

We withdraw ratings when an entity's entire debt is paid off or when the program or programs that we rate are terminated and the relevant debt extinguished. We may also withdraw ratings at the issuer's request, as a result of a merger or acquisition, or when a company no longer provides all of the information we require to continue surveillance on the ratings.

Definition of default

For the purposes of this study, we deem 'D' (default), 'SD' (selective default), and 'R' (regulatory intervention) issuer credit ratings to be defaults. We assume the default takes place on the earliest of the date we revised the rating(s) to 'D', 'SD', or 'R'; the date the issuer missed a debt payment; the date a distressed exchange offer was announced; or the date the debtor filed for bankruptcy.

An obligor rated 'SD' or 'D' is in default on one or more of its financial obligations, including rated and unrated financial obligations but excluding hybrid instruments classified as regulatory capital or in nonpayment according to terms. We consider an obligor to be in default unless we believe that such payments will be made within five business days of the due date in the absence of a stated grace period, or within the earlier of the stated grace period or 30 calendar days.

We assign a 'D' rating when we believe that the default will be a general default and that the obligor will fail to pay all or almost all of its obligations as they come due. We assign an 'SD' rating when we believe the obligor has selectively defaulted on a specific issue or class of obligations but will continue to meet its payment obligations on other issues or classes of obligations in a timely manner. We also lower our rating on an obligor to 'D' or 'SD' if it is conducting a distressed exchange offer, whereby one or more financial obligations are either repurchased for an amount of cash or replaced by other instruments with a total value that is less than par.

An obligor rated 'R' is under regulatory supervision owing to its financial condition. During the pendency of the regulatory supervision, the regulators may have the power to favor one class of obligations over others or pay some obligations and not others.

When an issuer defaults, we commonly subsequently withdraw the 'D' or 'SD' rating. For the purposes of this study, if an issuer defaults, we end its rating history at 'D'. If any defaulting entity reemerges from bankruptcy--or otherwise restructures its defaulted debt instruments, thereby reestablishing regular, timely payment on all its debts--we reenter this issuer into the database as a new entity. Its rating history after the default event is included in all calculations as entirely separate from its rating history prior to the earlier default.

Many practitioners use statistics from this default study to estimate "probability of default" and "probability of rating transition," based on observed historical default and transition frequencies. It is important to note that we do not ascribe a specific default probability to each rating category.

Calculations

Static pool methodology. S&P Global Ratings Research conducts its default studies on the basis of groups of ratings called static pools. For the purposes of this study, we form static pools by grouping issuers by rating category at the beginning of each year, quarter, or month that the database covers. Each static pool is followed from that point forward. We assign all companies included in the study to one or more static pools. When an issuer defaults, we assign that default to all of the static pools to which the issuer belonged.

We use the static pool methodology to avoid certain pitfalls in estimating default rates, such as by ensuring that default rates account for rating migration and can be calculated across multiperiod time horizons. Some methods for calculating default and rating transition rates might charge defaults against only the initial rating on the issuer, ignoring more recent rating changes that supply more current information. Other methods may calculate default rates using only the most recent year's default and rating data, which may yield comparatively low default rates during periods of high rating activity because they ignore prior years' default activity.

The pools are static in the sense that their membership remains constant over time. Each static pool can be viewed as a buy-and-hold portfolio. Because errors, if any, are corrected in each update and because the criteria for inclusion or exclusion of companies in the default study are subject to minor revisions as time goes by, it is not possible to compare static pools across different studies. Therefore, every update revises results to the same starting date of Dec. 31, 1980, to avoid continuity problems.

Entities with ratings we have withdrawn or discontinued--that is, revised to not rated (NR)--are surveilled with the aim of capturing a potential default. Because static pools only include entities with active ratings as of the beginning date of a given pool, we exclude companies with withdrawn ratings, as well as those that have defaulted, from subsequent static pools. If the rating on an entity is withdrawn after the start date of a particular static pool and the entity subsequently defaults, we will include it in that static pool as a default and categorize it in the rating category of which it was a member at that time.

For instance, the 2001 static pool consists of all companies rated as of 12:01 a.m. on Jan. 1, 2001. Adding those companies first rated in 2001 to the surviving members of the 2001 static pool forms the 2002 static pool. All rating changes that took place are reflected in the newly formed 2002 static pool through the ratings on these entities as of 12:01 a.m. on Jan. 1, 2002.

Consider the following example: An issuer is originally rated 'BB' in mid-2000, and we downgrade the company to 'B' in 2002. This is followed by a rating withdrawal in 2003 and a default in 2004. We would include this hypothetical company in the 2001 and 2002 static pools with the 'BB' rating, which it held at the beginning of those years. Likewise, we would include it in the 2003 static pool with the 'B' rating. It would not be part of the 2004 static pool because it was not rated as of the first day of that year, and we would not include it in any pool after the last day of 2004 because we had withdrawn our rating on the company by then. Yet each of the three static pools in which we include this company (2001-2003) would record its 2004 default at the appropriate time horizon.

Default rate calculation. We calculate annual default rates for each static pool, first in units and later as percentages of the issuers in each rating category. We combined these percentages to obtain cumulative default rates for the 41 years the study covers.

Issuer-weighted default rates. We base all default rates that appear in this study on the number of issuers rather than the currency amounts affected by defaults or rating changes. Although currency amounts provide information about the portion of the market that is affected by defaults or rating changes, issuer-weighted averages are more useful measures of the performance of ratings.

Average cumulative default rate calculation. In this study, we also calculate and present average cumulative default rates for different time horizons. For example, table 7 shows that the one-year average cumulative default rate for 'A' rated UK corporate issuers is 0.08% and the three-year average is 0.28%.

We first consider the static pool of ratings at the beginning of each calendar year. For each static pool, we calculate the marginal default rates for each calendar year after the static pool's formation. These one-year marginal default rates are "conditional on survival." For example, the marginal default rate for the third year is equal to the number of defaults during the third year divided by the number of ratings from the static pool that had "survived" (not moved to 'D') by the beginning of the third year.

We then average the marginal default rates for each time horizon across static pools, weighting by the number of surviving ratings at the beginning of each time horizon, to give an average marginal default rate per time horizon, as well as average marginal survival rates (equal to one minus the average marginal default rate). Finally, the average cumulative default rate for each time horizon is calculated as one minus the product of marginal survival rates up to that time horizon.

Transition analysis

Transition rates compare the issuer credit ratings at the beginning of a period with the ratings at the end of the period. To compute one-year rating transition rates by rating category, we compare the rating on each entity at the end of a particular year with the rating at the beginning of the same year. An issuer that remained rated for more than one year was counted as many times as the number of years it was rated. For instance, an issuer rated from the middle of 1984 to the middle of 1991 would appear in the seven consecutive one-year transition matrices from 1985 to 1991. If the rating on the issuer was withdrawn in the middle of 1991, it would be included in the column representing transitions to NR in the 1991 transition matrix. Similarly, if it defaulted in the middle of 1991, it would be included in the column representing transitions to 'D' in the 1991 one-year transition matrix.

All 1981 static pool members still rated on Jan. 1, 2023, had 43 one-year transitions, while companies first rated on Jan. 1, 2023, had only one. Each one-year transition matrix displays all rating movements between rating categories from the beginning of the year through year-end. For each rating listed in the matrix's leftmost column, there are nine ratios listed in the rows, corresponding to the rating categories from 'AAA' to 'D', plus NR.

The only ratings considered in these calculations are those on entities at the beginning of each static pool and those at the end. All rating changes that occur in between are ignored. For example, if an entity was rated 'A' on Jan. 1, 2014, downgraded to 'BBB' in the middle of the year, and then upgraded to 'A' later in the year (with no other subsequent rating changes), this entity would be included only in the percentage of issuers that began the year as 'A' and ended the year as 'A'. This approach also applies to transition matrices that span longer time horizons. If an issuer defaults or the rating is withdrawn in the middle of the year, then we would consider it either rated 'D' or not rated as of Dec. 31 of that particular year.

Multiyear transitions

We also calculate multiyear transitions for periods of two to 10 years. In this case, we compare the rating at the beginning of the multiyear period with the rating at the end. For example, three-year transition matrices are the result of comparing ratings at the beginning of the years 1981-2023 with the ratings at the end of the years 1983-2023. Otherwise, the methodology is identical to the one we use for single-year transitions.

We calculate average transition matrices on the basis of the multiyear matrices just described. These average matrices are a true summary, the ratios of which represent the historical incidence of the ratings listed in the first column changing to the ones listed in the top row over the course of the multiyear period. Transition matrices that present averages over multiple time horizons are also calculated as issuer-weighted averages.

Rating modifiers

We use rating modifiers (plus and minus signs) to calculate the upgrade and downgrade rates, as well as the magnitude of rating changes, throughout this study. However, some transition tables may show only full rating categories for practical reasons. In other words, the use of a rating category suggests that transitions to, for example, 'AA-' from 'AA' or to 'BBB-' from 'BBB+' are not considered rating transitions because the rating remained within the rating category.

Standard deviations

Many of the tables and charts in this study display averages of default rates, transition rates, and Gini coefficients. Often these are issuer-weighted averages. Default and transition rates can fluctuate depending on many circumstances specific to particular time frames, industries, and geographic regions. As a supplement to many of the averages and time series we present in this study, we also show standard deviations to provide a gauge of the dispersion of data behind the averages.

For the transition matrices, the standard deviation for each cell in a given matrix is a weighted standard deviation, calculated using the data from each of the underlying static pool years that contribute to the averages, weighted by that static pool year's issuer base for each rating level. For example, in the average one-year transition matrix, each cell's weighted standard deviation is calculated from the series of that particular cell in each of the 42 static pools beginning with the 1981 static pool and ending with the 2021 static pool. The squared difference between each static pool's transition rate and the weighted average--which is the data point in each cell--is multiplied by each static pool's weight. These weights are based on each static pool rating level's contribution to the 42-year total issuer base for each rating level. We then divide this by the ratio of the total number of nonzero weights minus one and the total number of nonzero weights.

We derive Gini coefficients' standard deviations from the time series for all their constituent annual static pools. As an example, we calculate the standard deviation for the seven-year weighted average global Gini coefficient from the time series of all available seven-year Gini coefficients by static pool. In this case, these are the seven-year Gini coefficients beginning with the 1981 static pool through the 2015 static pool. We calculated standard deviations for Gini coefficients in this study as the standard deviations of a sample, rather than as the standard deviations of a population.

Appendix II: Gini Coefficient Methodology

We calculate Gini coefficients as one way to quantify our ratings' rank-ordering power of creditworthiness, based on observed default rates.

To measure relative ratings performance, we use the Lorenz curve as a graphical representation of the proportionality of a distribution, and we summarize this via the Gini coefficient. For this study, the Lorenz curve is plotted with the x-axis showing the cumulative share of issuers, arranged by rating level, while the y-axis represents the cumulative share of defaulters, also arranged by rating level. For both axes of the Lorenz curve, the observations are ordered from the low end of the ratings scale ('CCC'/'C') to the high end ('AAA'). As an example, if 'CCC'/'C' rated entities made up 10% of the total population of issuers at the start of the time frame examined (x-axis) and 50% of the defaulters (y-axis), then the coordinate (10, 50) would be the first point on the curve.

We illustrate the procedure for calculating the Gini coefficient in chart 11. Area B is bounded by the random curve and the Lorenz curve, while area A is bounded by the Lorenz curve and the ideal curve. The Gini coefficient is defined as area B divided by the sum of area A and area B. The Gini coefficient can therefore range from 0% (if the Lorenz curve follows the random curve) to 100% (if the Lorenz curve follows the ideal curve). In general, therefore, the higher the Gini coefficient, the greater the link between our ratings and observed default propensity.

If our ratings only randomly approximated default propensity, the Lorenz curve would fall along the diagonal shown as the random curve in chart 11, and the Gini coefficient would be 0%. On the other hand, if all defaults occurred only among the lowest-rated issuers, with no defaults among the higher-rated issuers, the Lorenz curve would lie along the line shown as the ideal curve in chart 11, and the Gini coefficient would be 100%. Typically, the observed Lorenz curve falls between the ideal and random curves, and we use the Gini coefficient as a summary statistic to quantify its proximity to the ideal curve.

Appendix III: Detailed Cumulative Default And Transition Data

Table 16

Static pool cumulative corporate default rates among all United Kingdom ratings, 1981 to 2023 (%)
Rating: All rated
		Time horizon
Year	Issuers	Y1	Y2	Y3	Y4	Y5	Y6	Y7	Y8	Y9	Y10	Y11	Y12	Y13	Y14	Y15
1981	3	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
1982	4	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
1983	5	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
1984	8	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
1985	11	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
1986	14	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
1987	17	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
1988	20	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
1989	24	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
1990	32	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
1991	50	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
1992	60	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
1993	71	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
1994	83	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	1.20	1.20	1.20	1.20	1.20	1.20	1.20
1995	102	0.00	0.00	0.00	0.00	0.00	0.00	0.00	1.96	1.96	1.96	1.96	1.96	1.96	1.96	1.96
1996	117	0.00	0.00	0.00	0.00	0.00	0.00	2.56	2.56	2.56	2.56	2.56	2.56	2.56	2.56	2.56
1997	137	0.00	0.00	0.00	0.00	0.00	2.19	2.92	2.92	2.92	2.92	2.92	2.92	2.92	2.92	2.92
1998	159	0.00	1.26	1.26	1.89	4.40	5.03	5.66	5.66	5.66	5.66	5.66	5.66	5.66	5.66	5.66
1999	192	1.04	1.56	4.17	6.77	7.81	8.33	8.33	8.85	8.85	8.85	8.85	8.85	8.85	8.85	8.85
2000	216	0.46	3.24	6.02	6.94	7.41	7.41	7.87	8.33	8.33	8.33	8.33	8.33	8.33	8.33	8.33
2001	226	3.10	6.19	7.96	8.41	8.41	8.85	9.29	9.29	9.29	9.29	9.29	9.29	9.29	9.29	9.29
2002	243	2.47	3.70	4.12	4.12	4.53	4.94	4.94	4.94	4.94	4.94	5.35	5.35	5.35	5.35	5.35
2003	247	1.21	1.62	1.62	2.02	2.43	2.43	2.83	2.83	2.83	3.24	3.24	3.24	3.24	3.24	3.64
2004	249	0.40	0.40	0.80	1.20	1.20	1.61	1.61	1.61	2.01	2.01	2.01	2.01	2.01	2.41	2.41
2005	257	0.00	0.39	0.78	0.78	1.17	1.17	1.17	1.56	1.56	1.56	1.56	1.56	1.56	1.56	1.95
2006	257	0.78	1.56	1.56	2.33	2.33	2.33	2.72	2.72	2.72	2.72	2.72	2.72	2.72	2.72	2.72
2007	261	0.77	1.15	2.30	2.30	2.30	2.68	2.68	2.68	2.68	2.68	2.68	2.68	2.68	2.68	2.68
2008	254	0.39	1.57	1.57	1.57	1.97	1.97	2.36	2.36	2.36	2.36	2.36	2.36	2.36	2.36	2.36
2009	255	1.18	1.18	1.18	1.57	1.57	1.96	1.96	1.96	1.96	1.96	1.96	1.96	1.96	1.96	1.96
2010	248	0.00	0.00	0.40	0.40	0.81	0.81	1.21	1.21	1.21	1.21	1.21	1.21	1.21	1.21	n/a
2011	267	0.00	0.37	0.37	0.75	1.50	1.87	1.87	1.87	1.87	3.00	3.00	3.00	3.00	n/a	n/a
2012	279	0.36	0.72	1.43	2.51	3.23	3.23	3.58	3.94	5.02	5.02	5.02	5.02	n/a	n/a	n/a
2013	284	0.70	1.41	2.46	3.17	3.52	3.87	4.23	5.28	5.28	5.28	5.28	n/a	n/a	n/a	n/a
2014	321	0.62	1.87	2.49	3.12	3.74	4.36	6.23	6.23	6.54	6.85	n/a	n/a	n/a	n/a	n/a
2015	369	1.08	2.71	3.79	4.61	5.69	7.32	7.32	7.59	7.86	n/a	n/a	n/a	n/a	n/a	n/a
2016	384	1.56	2.86	3.65	4.95	6.51	6.77	7.03	7.29	n/a	n/a	n/a	n/a	n/a	n/a	n/a
2017	376	1.60	2.93	4.26	6.12	6.38	6.65	6.91	n/a	n/a	n/a	n/a	n/a	n/a	n/a	n/a
2018	384	1.56	2.86	4.69	5.21	5.99	6.51	n/a	n/a	n/a	n/a	n/a	n/a	n/a	n/a	n/a
2019	405	1.23	3.70	4.20	5.19	5.68	n/a	n/a	n/a	n/a	n/a	n/a	n/a	n/a	n/a	n/a
2020	404	3.22	3.71	4.95	5.45	n/a	n/a	n/a	n/a	n/a	n/a	n/a	n/a	n/a	n/a	n/a
2021	385	0.52	2.08	3.38	n/a	n/a	n/a	n/a	n/a	n/a	n/a	n/a	n/a	n/a	n/a	n/a
2022	383	1.57	2.87	n/a	n/a	n/a	n/a	n/a	n/a	n/a	n/a	n/a	n/a	n/a	n/a	n/a
2023	383	1.31	n/a	n/a	n/a	n/a	n/a	n/a	n/a	n/a	n/a	n/a	n/a	n/a	n/a	n/a
Summary Statistics		Y1	Y2	Y3	Y4	Y5	Y6	Y7	Y8	Y9	Y10	Y11	Y12	Y13	Y14	Y15
Marginal average		1.02	0.99	0.80	0.63	0.52	0.38	0.36	0.20	0.14	0.10	0.02	0.00	0.00	0.03	0.06
Cumulative average		1.02	2.00	2.78	3.39	3.90	4.27	4.61	4.80	4.93	5.03	5.05	5.05	5.05	5.08	5.13
Standard deviation		0.85	1.49	2.06	2.46	2.69	2.84	2.91	2.93	2.88	2.79	2.73	2.73	2.72	2.77	2.81
Median		0.36	0.56	0.80	0.99	1.20	1.74	1.87	1.92	1.96	1.96	1.96	1.76	1.56	1.38	1.95
Min		0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
Max		3.22	6.19	7.96	8.41	8.41	8.85	9.29	9.29	9.29	9.29	9.29	9.29	9.29	9.29	9.29

Table 17

Static pool cumulative corporate default rates among investment-grade United Kingdom ratings, 1981 to 2023 (%)
Rating: Investment-grade
		Time horizon
Year	Issuers	Y1	Y2	Y3	Y4	Y5	Y6	Y7	Y8	Y9	Y10	Y11	Y12	Y13	Y14	Y15
1981	3	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
1982	4	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
1983	5	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
1984	8	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
1985	11	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
1986	14	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
1987	16	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
1988	19	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
1989	23	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
1990	31	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
1991	50	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
1992	60	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
1993	71	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
1994	83	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	1.20	1.20	1.20	1.20	1.20	1.20	1.20
1995	99	0.00	0.00	0.00	0.00	0.00	0.00	0.00	1.01	1.01	1.01	1.01	1.01	1.01	1.01	1.01
1996	111	0.00	0.00	0.00	0.00	0.00	0.00	0.90	0.90	0.90	0.90	0.90	0.90	0.90	0.90	0.90
1997	130	0.00	0.00	0.00	0.00	0.00	0.77	1.54	1.54	1.54	1.54	1.54	1.54	1.54	1.54	1.54
1998	149	0.00	0.00	0.00	0.67	2.01	2.68	3.36	3.36	3.36	3.36	3.36	3.36	3.36	3.36	3.36
1999	165	0.00	0.00	0.61	1.82	2.42	3.03	3.03	3.64	3.64	3.64	3.64	3.64	3.64	3.64	3.64
2000	183	0.00	0.55	1.64	2.19	2.73	2.73	3.28	3.28	3.28	3.28	3.28	3.28	3.28	3.28	3.28
2001	191	0.52	1.57	2.62	3.14	3.14	3.66	3.66	3.66	3.66	3.66	3.66	3.66	3.66	3.66	3.66
2002	207	0.48	0.97	1.45	1.45	1.93	1.93	1.93	1.93	1.93	1.93	1.93	1.93	1.93	1.93	1.93
2003	211	0.00	0.00	0.00	0.00	0.00	0.00	0.47	0.47	0.47	0.47	0.47	0.47	0.47	0.47	0.47
2004	212	0.00	0.00	0.00	0.00	0.00	0.47	0.47	0.47	0.47	0.47	0.47	0.47	0.47	0.47	0.47
2005	220	0.00	0.00	0.00	0.00	0.45	0.45	0.45	0.45	0.45	0.45	0.45	0.45	0.45	0.45	0.45
2006	218	0.00	0.00	0.00	0.46	0.46	0.46	0.46	0.46	0.46	0.46	0.46	0.46	0.46	0.46	0.46
2007	221	0.00	0.00	0.45	0.45	0.45	0.45	0.45	0.45	0.45	0.45	0.45	0.45	0.45	0.45	0.45
2008	218	0.00	0.46	0.46	0.46	0.46	0.46	0.46	0.46	0.46	0.46	0.46	0.46	0.46	0.46	0.46
2009	214	0.47	0.47	0.47	0.47	0.47	0.47	0.47	0.47	0.47	0.47	0.47	0.47	0.47	0.47	0.47
2010	210	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	N/A
2011	211	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.47	0.47	0.47	0.47	N/A	N/A
2012	212	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.47	0.47	0.47	0.47	N/A	N/A	N/A
2013	208	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.48	0.48	0.48	0.48	N/A	N/A	N/A	N/A
2014	211	0.00	0.00	0.00	0.00	0.00	0.00	0.47	0.47	0.47	0.47	N/A	N/A	N/A	N/A	N/A
2015	221	0.00	0.00	0.00	0.00	0.00	0.45	0.45	0.45	0.45	N/A	N/A	N/A	N/A	N/A	N/A
2016	223	0.00	0.00	0.00	0.00	0.45	0.45	0.45	0.45	N/A	N/A	N/A	N/A	N/A	N/A	N/A
2017	216	0.00	0.00	0.00	0.00	0.00	0.00	0.00	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A
2018	213	0.00	0.00	0.00	0.00	0.00	0.00	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A
2019	216	0.00	0.00	0.00	0.00	0.00	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A
2020	212	0.00	0.00	0.00	0.00	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A
2021	199	0.00	0.00	0.00	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A
2022	190	0.00	0.00	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A
2023	192	0.00	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A
Summary Statistics		Y1	Y2	Y3	Y4	Y5	Y6	Y7	Y8	Y9	Y10	Y11	Y12	Y13	Y14	Y15
Marginal average		0.05	0.08	0.12	0.11	0.13	0.12	0.12	0.07	0.05	0.02	0.00	0.00	0.00	0.00	0.00
Cumulative average		0.05	0.13	0.26	0.37	0.50	0.62	0.74	0.81	0.85	0.87	0.87	0.87	0.87	0.87	0.87
Standard deviation		0.13	0.30	0.53	0.68	0.83	0.96	1.06	1.10	1.11	1.12	1.13	1.15	1.17	1.19	1.20
Median		0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.45	0.45	0.46	0.46	0.46	0.45	0.45	0.45
Min		0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
Max		0.52	1.57	2.62	3.14	3.14	3.66	3.66	3.66	3.66	3.66	3.66	3.66	3.66	3.66	3.66

Table 18

Static pool cumulative corporate default rates among speculative-grade United Kingdom ratings, 1981 to 2023 (%)
Rating: Speculative-grade
		Time horizon
Year	Issuers	Y1	Y2	Y3	Y4	Y5	Y6	Y7	Y8	Y9	Y10	Y11	Y12	Y13	Y14	Y15
1981	0	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A
1982	0	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A
1983	0	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A
1984	0	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A
1985	0	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A
1986	0	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A
1987	1	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
1988	1	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
1989	1	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
1990	1	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
1991	0	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A
1992	0	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A
1993	0	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A
1994	0	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A
1995	3	0.00	0.00	0.00	0.00	0.00	0.00	0.00	33.33	33.33	33.33	33.33	33.33	33.33	33.33	33.33
1996	6	0.00	0.00	0.00	0.00	0.00	0.00	33.33	33.33	33.33	33.33	33.33	33.33	33.33	33.33	33.33
1997	7	0.00	0.00	0.00	0.00	0.00	28.57	28.57	28.57	28.57	28.57	28.57	28.57	28.57	28.57	28.57
1998	10	0.00	20.00	20.00	20.00	40.00	40.00	40.00	40.00	40.00	40.00	40.00	40.00	40.00	40.00	40.00
1999	27	7.41	11.11	25.93	37.04	40.74	40.74	40.74	40.74	40.74	40.74	40.74	40.74	40.74	40.74	40.74
2000	33	3.03	18.18	30.30	33.33	33.33	33.33	33.33	36.36	36.36	36.36	36.36	36.36	36.36	36.36	36.36
2001	35	17.14	31.43	37.14	37.14	37.14	37.14	40.00	40.00	40.00	40.00	40.00	40.00	40.00	40.00	40.00
2002	36	13.89	19.44	19.44	19.44	19.44	22.22	22.22	22.22	22.22	22.22	25.00	25.00	25.00	25.00	25.00
2003	36	8.33	11.11	11.11	13.89	16.67	16.67	16.67	16.67	16.67	19.44	19.44	19.44	19.44	19.44	22.22
2004	37	2.70	2.70	5.41	8.11	8.11	8.11	8.11	8.11	10.81	10.81	10.81	10.81	10.81	13.51	13.51
2005	37	0.00	2.70	5.41	5.41	5.41	5.41	5.41	8.11	8.11	8.11	8.11	8.11	8.11	8.11	10.81
2006	39	5.13	10.26	10.26	12.82	12.82	12.82	15.38	15.38	15.38	15.38	15.38	15.38	15.38	15.38	15.38
2007	40	5.00	7.50	12.50	12.50	12.50	15.00	15.00	15.00	15.00	15.00	15.00	15.00	15.00	15.00	15.00
2008	36	2.78	8.33	8.33	8.33	11.11	11.11	13.89	13.89	13.89	13.89	13.89	13.89	13.89	13.89	13.89
2009	41	4.88	4.88	4.88	7.32	7.32	9.76	9.76	9.76	9.76	9.76	9.76	9.76	9.76	9.76	9.76
2010	38	0.00	0.00	2.63	2.63	5.26	5.26	7.89	7.89	7.89	7.89	7.89	7.89	7.89	7.89	N/A
2011	56	0.00	1.79	1.79	3.57	7.14	8.93	8.93	8.93	8.93	12.50	12.50	12.50	12.50	N/A	N/A
2012	67	1.49	2.99	5.97	10.45	13.43	13.43	14.93	16.42	19.40	19.40	19.40	19.40	N/A	N/A	N/A
2013	76	2.63	5.26	9.21	11.84	13.16	14.47	15.79	18.42	18.42	18.42	18.42	N/A	N/A	N/A	N/A
2014	110	1.82	5.45	7.27	9.09	10.91	12.73	17.27	17.27	18.18	19.09	N/A	N/A	N/A	N/A	N/A
2015	148	2.70	6.76	9.46	11.49	14.19	17.57	17.57	18.24	18.92	N/A	N/A	N/A	N/A	N/A	N/A
2016	161	3.73	6.83	8.70	11.80	14.91	15.53	16.15	16.77	N/A	N/A	N/A	N/A	N/A	N/A	N/A
2017	160	3.75	6.88	10.00	14.38	15.00	15.63	16.25	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A
2018	171	3.51	6.43	10.53	11.70	13.45	14.62	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A
2019	189	2.65	7.94	8.99	11.11	12.17	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A
2020	192	6.77	7.81	10.42	11.46	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A
2021	186	1.08	4.30	6.99	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A
2022	193	3.11	5.70	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A
2023	191	2.62	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A
Summary Statistics		Y1	Y2	Y3	Y4	Y5	Y6	Y7	Y8	Y9	Y10	Y11	Y12	Y13	Y14	Y15
Marginal average		3.51	3.53	2.88	2.42	1.99	1.49	1.43	0.89	0.66	0.63	0.19	0.00	0.00	0.27	0.60
Cumulative average		3.51	6.92	9.60	11.78	13.54	14.83	16.05	16.79	17.34	17.87	18.02	18.02	18.02	18.24	18.73
Standard deviation		3.95	7.15	9.14	10.30	11.88	12.20	12.68	12.97	13.16	13.35	13.70	14.02	14.36	14.60	14.67
Median		2.65	5.58	8.33	10.78	12.17	13.13	15.38	16.54	16.67	16.90	15.38	15.19	15.00	15.19	15.38
Min		0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
Max		17.14	31.43	37.14	37.14	40.74	40.74	40.74	40.74	40.74	40.74	40.74	40.74	40.74	40.74	40.74

Table 19

One-Year weighted average United Kingdom corporate transition matrix, 1981 to 2023 (%)
From/To	AAA	AA	A	BBB	BB	B	CCC/C	D	NR
AAA	82.87	13.26	1.10	0.00	0.00	0.00	0.55	0.00	2.21
	(21.74)	(20.25)	(3.21)	(0.00)	(0.00)	(0.00)	(3.33)	(0.00)	(9.04)
AA	0.30	85.60	10.16	0.20	0.00	0.00	0.00	0.00	3.75
	(1.59)	(8.96)	(8.57)	(1.00)	(0.00)	(0.00)	(0.00)	(0.00)	(4.33)
A	0.04	1.53	88.03	5.47	0.18	0.07	0.00	0.07	4.60
	(0.18)	(3.05)	(6.82)	(4.29)	(0.59)	(0.76)	(0.00)	(0.27)	(2.82)
BBB	0.00	0.09	2.89	88.16	2.19	0.09	0.09	0.05	6.43
	(0.00)	(0.37)	(3.13)	(6.26)	(2.33)	(0.37)	(0.39)	(0.27)	(3.79)
BB	0.00	0.00	0.12	3.71	77.35	6.06	0.37	0.50	11.88
	(0.00)	(0.00)	(0.45)	(3.86)	(10.48)	(5.00)	(1.27)	(2.02)	(7.43)
B	0.00	0.00	0.00	0.00	3.52	73.72	6.31	2.13	14.32
	(0.00)	(0.00)	(0.00)	(0.00)	(4.41)	(9.76)	(4.37)	(2.29)	(7.76)
CCC/C	0.00	0.00	0.00	0.51	0.00	11.79	45.64	25.64	16.41
	(0.00)	(0.00)	(0.00)	(1.55)	(0.00)	(13.35)	(23.21)	(19.64)	(16.48)
Note: Numbers in parentheses are weighted standard deviations. Source: S&P Global Ratings Credit Research & Insights, S&P Global Market Intelligence's CreditPro®

Table 20

Two-year weighted average United Kingdom corporate transition matrix, 1981-2023, (%)
From/To	AAA	AA	A	BBB	BB	B	CCC/C	D	NR
AAA	67.96	24.86	2.76	0.00	0.00	0.00	0.55	0.00	3.87
	(28.81)	(26.27)	(5.99)	(0.00)	(0.00)	(0.00)	(3.33)	(0.00)	(11.05)
AA	0.60	73.23	18.21	0.70	0.10	0.00	0.00	0.00	7.16
	(2.90)	(12.54)	(10.96)	(1.64)	(0.47)	(0.00)	(0.00)	(0.00)	(6.45)
A	0.04	2.70	77.29	10.06	0.30	0.11	0.08	0.15	9.27
	(0.18)	(4.10)	(10.37)	(5.87)	(0.65)	(0.79)	(0.28)	(0.37)	(3.62)
BBB	0.00	0.20	5.39	77.93	3.58	0.44	0.15	0.20	12.11
	(0.00)	(0.56)	(4.77)	(9.68)	(2.87)	(0.94)	(0.64)	(0.79)	(5.58)
BB	0.00	0.00	0.27	6.68	59.81	8.81	0.13	1.87	22.43
	(0.00)	(0.00)	(0.64)	(6.23)	(14.23)	(6.45)	(1.17)	(4.36)	(10.65)
B	0.00	0.00	0.00	0.00	5.68	52.28	8.49	5.84	27.70
	(0.00)	(0.00)	(0.00)	(0.00)	(5.33)	(12.42)	(4.64)	(5.33)	(10.40)
CCC/C	0.00	0.00	0.00	0.57	0.00	14.20	23.30	36.93	25.00
	(0.00)	(0.00)	(0.00)	(1.84)	(0.00)	(16.55)	(18.89)	(18.36)	(17.49)
Note: Numbers in parentheses are weighted standard deviations. Source: S&P Global Ratings Credit Research & Insights, S&P Global Market Intelligence's CreditPro®

Table 21

Three-year weighted average United Kingdom corporate transition matrix, 1981-2023, (%)
From/To	AAA	AA	A	BBB	BB	B	CCC/C	D	NR
AAA	54.14	34.25	4.97	0.00	0.00	0.00	0.55	0.00	6.08
	(29.64)	(27.48)	(8.67)	(0.00)	(0.00)	(0.00)	(3.74)	(0.00)	(12.46)
AA	0.80	62.55	24.80	1.00	0.10	0.00	0.10	0.00	10.64
	(4.05)	(13.65)	(11.60)	(1.71)	(0.51)	(0.00)	(0.51)	(0.00)	(8.10)
A	0.08	3.48	67.97	13.68	0.43	0.15	0.15	0.27	13.79
	(0.32)	(4.83)	(12.20)	(6.01)	(0.76)	(0.82)	(0.50)	(0.56)	(4.44)
BBB	0.00	0.31	7.39	69.29	4.60	0.72	0.00	0.41	17.27
	(0.00)	(0.73)	(5.57)	(11.41)	(2.96)	(1.04)	(0.00)	(1.48)	(6.89)
BB	0.00	0.00	0.44	8.15	47.74	9.46	0.73	2.91	30.57
	(0.00)	(0.00)	(0.81)	(7.84)	(14.70)	(4.53)	(2.44)	(6.46)	(14.34)
B	0.00	0.00	0.00	0.18	6.14	36.58	8.51	9.39	39.21
	(0.00)	(0.00)	(0.00)	(0.87)	(4.71)	(10.84)	(4.55)	(6.90)	(11.42)
CCC/C	0.00	0.00	0.00	0.65	0.00	11.69	10.39	43.51	33.77
	(0.00)	(0.00)	(0.00)	(2.40)	(0.00)	(14.98)	(14.99)	(20.08)	(19.69)
Note: Numbers in parentheses are weighted standard deviations. Source: S&P Global Ratings Credit Research & Insights, S&P Global Market Intelligence's CreditPro®

Table 22

Five-year weighted average United Kingdom corporate transition matrix, 1981-2023, (%)
From/To	AAA	AA	A	BBB	BB	B	CCC/C	D	NR
AAA	35.91	41.44	9.94	0.55	0.00	0.00	0.00	0.00	12.15
	(25.79)	(24.77)	(13.20)	(2.21)	(0.00)	(0.00)	(0.00)	(0.00)	(15.65)
AA	0.51	46.51	33.06	2.05	0.00	0.00	0.10	0.21	17.56
	(3.29)	(14.80)	(13.18)	(2.48)	(0.00)	(0.00)	(0.51)	(0.69)	(9.67)
A	0.12	4.13	54.01	18.10	1.07	0.21	0.21	0.66	21.49
	(0.44)	(5.25)	(12.53)	(5.55)	(1.34)	(0.63)	(0.56)	(1.09)	(6.50)
BBB	0.00	0.47	8.87	57.03	5.08	0.70	0.06	0.58	27.20
	(0.00)	(1.15)	(3.50)	(11.98)	(3.31)	(1.19)	(0.24)	(1.61)	(8.70)
BB	0.00	0.00	0.70	8.52	33.22	8.35	1.04	5.22	42.96
	(0.00)	(0.00)	(0.95)	(7.35)	(12.48)	(4.91)	(3.04)	(8.70)	(15.61)
B	0.00	0.00	0.00	0.87	5.56	18.85	4.14	15.47	55.12
	(0.00)	(0.00)	(0.00)	(2.25)	(3.70)	(6.96)	(2.81)	(6.93)	(11.13)
CCC/C	0.00	0.00	0.00	0.91	0.00	2.73	0.91	49.09	46.36
	(0.00)	(0.00)	(0.00)	(6.85)	(0.00)	(3.41)	(2.80)	(22.56)	(22.48)
Note: Numbers in parentheses are weighted standard deviations. Source: S&P Global Ratings Credit Research & Insights, S&P Global Market Intelligence's CreditPro®

Table 23

Seven-year weighted average United Kingdom corporate transition matrix, 1981-2023, (%)
From/To	AAA	AA	A	BBB	BB	B	CCC/C	D	NR
AAA	26.52	41.99	14.36	1.66	0.00	0.00	0.00	0.00	15.47
	(21.11)	(21.93)	(13.63)	(3.71)	(0.00)	(0.00)	(0.00)	(0.00)	(16.53)
AA	0.31	35.53	36.27	3.46	0.00	0.00	0.10	0.42	23.90
	(0.90)	(13.97)	(14.32)	(2.82)	(0.00)	(0.00)	(0.53)	(0.96)	(9.95)
A	0.09	4.14	43.10	21.66	1.78	0.04	0.04	1.07	28.07
	(0.37)	(5.50)	(10.85)	(5.33)	(1.54)	(0.22)	(0.23)	(1.57)	(7.77)
BBB	0.00	0.68	9.82	48.17	4.13	0.61	0.07	0.81	35.70
	(0.00)	(1.93)	(3.10)	(11.56)	(2.29)	(0.97)	(0.27)	(1.70)	(8.93)
BB	0.00	0.00	0.43	7.17	22.61	7.17	0.65	7.83	54.13
	(0.00)	(0.00)	(0.88)	(7.04)	(12.06)	(4.23)	(1.99)	(10.55)	(14.08)
B	0.00	0.00	0.00	1.00	5.30	9.89	1.86	19.05	62.89
	(0.00)	(0.00)	(0.00)	(2.14)	(3.85)	(5.34)	(1.86)	(8.26)	(10.18)
CCC/C	0.00	0.00	0.00	0.00	0.00	0.00	1.18	49.41	49.41
	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(2.18)	(24.63)	(25.00)
Note: Numbers in parentheses are weighted standard deviations. Source: S&P Global Ratings Credit Research & Insights, S&P Global Market Intelligence's CreditPro®

Table 24

Ten-year weighted average United Kingdom corporate transition matrix, 1981-2023, (%)
From/To	AAA	AA	A	BBB	BB	B	CCC/C	D	NR
AAA	14.36	38.12	16.57	6.63	0.00	0.00	0.00	0.00	24.31
	(13.61)	(22.46)	(17.70)	(7.48)	(0.00)	(0.00)	(0.00)	(0.00)	(16.72)
AA	0.33	26.32	33.99	6.80	0.11	0.00	0.00	0.66	31.80
	(0.99)	(13.81)	(13.94)	(5.81)	(0.50)	(0.00)	(0.00)	(1.14)	(10.48)
A	0.00	3.38	32.33	24.54	2.05	0.10	0.00	1.28	36.32
	(0.00)	(4.94)	(10.43)	(6.34)	(1.63)	(0.33)	(0.00)	(1.72)	(9.20)
BBB	0.00	0.61	10.57	37.44	3.29	0.43	0.00	1.13	46.53
	(0.00)	(2.14)	(3.99)	(10.19)	(2.98)	(0.99)	(0.00)	(1.85)	(8.40)
BB	0.00	0.00	0.00	5.50	16.21	5.81	0.61	11.31	60.55
	(0.00)	(0.00)	(0.00)	(6.10)	(10.75)	(5.14)	(1.57)	(12.01)	(11.40)
B	0.00	0.00	0.00	0.49	4.89	4.16	1.22	21.76	67.48
	(0.00)	(0.00)	(0.00)	(1.35)	(3.90)	(4.09)	(2.53)	(10.24)	(9.50)
CCC/C	0.00	0.00	0.00	0.00	0.00	0.00	0.00	55.26	44.74
	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(34.66)	(34.66)
Note: Numbers in parentheses are weighted standard deviations. Source: S&P Global Ratings Credit Research & Insights, S&P Global Market Intelligence's CreditPro®

This report does not constitute a rating action.

Ratings Performance Analytics:	Nick W Kraemer, FRM, New York + 1 (212) 438 1698; nick.kraemer@spglobal.com
	Zev R Gurwitz, Albany + 1 (212) 438 7128; zev.gurwitz@spglobal.com
Research Contributor:	Nivritti Mishra Richhariya, CRISIL Global Analytical Center, an S&P Global Ratings affiliate, Mumbai

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Sector
Credit Markets Research Default Transition & Recovery
Topic
Confronting Credit Headwinds