OREANDA-NEWS. Concerns about foreign investors' willingness to fund the UK's current account deficit after Brexit are premature and may prove misplaced, says Fitch Ratings in its latest Global Perspectives commentary.

The Brexit referendum result casts uncertainty over the economic outlook, undermining the UK's attractiveness as an investment destination. This is important in the context of the large UK current account deficit, which must be matched by equally large capital inflows. With the UK deficit running at just over GBP100bn annually, exceeded only by the US in nominal terms, the question is whether foreign investors are still willing to fund a large deficit and on what terms.

Assessing the sustainability of UK current account funding is complicated by the country's status as a global financial centre, whereby capital flows are large and volatile. Brexit adds uncertainty, with the UK's dominant role in international finance subject to change, possibly altering the balance of payments.

Today's report considers UK capital flows in recent years, concluding that the current account has been funded largely by non-debt flows, the prospects for which may alter depending on the terms of the UK's exit from the EU. The agency also notes the possibility of changes to the UK's international investment position, and associated flows.

Definitive conclusions on the size of the current account and its funding after Brexit are not possible yet, but Fitch argues that negotiations on EU market access, and broader investor sentiment regarding the UK are issues to watch.

Global Perspectives is a monthly commentary series by James McCormack, Fitch's Global Head of Sovereign Ratings, on key issues affecting the world economy.