The risk-free rate is a theoretical rate of return of an investment with zero risk of financial loss. This rate represents the minimum interest an investor would expect from a risk-free investment over a period of time. It is important to remember that the risk-free rate is only theoretical as all investments carry even the smallest of risks. Across European countries, average risk-free rates differed quite significantly.
United Kingdom is low risk and low reward
When average risk-free rates on a theoretical investment with no risk is high, like seen in Turkey and Ukraine, the opportunity for high reward investments must seem tempting. But with high rewards come higher risks. Countries such as the UK and Germany has consistently shown low risk-free rates due to their investment markets’ relative stability.
Market risk premiums
Market risk premiums (MRP) are a measure that is closely associated with average risk-free rates. MRPs are a measurement of the expected return on investment an investor looks to make. For potential investors looking to add to their portfolio, the perfect scenario for a risk-based investment would be a high rate of return with as small a risk as possible. There are three main concepts to MRPs, including required market risk premiums, historical market risk premiums and expected market risk premiums. Like average risk-free rates, MRPs vary quite widely across Europe.
Average risk free rate (RF) on investments in the United Kingdom (UK) from 2015 to 2023
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Average risk free rate
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The source added the following information "This paper contains the statistics of a survey about the Risk-Free Rate (RF) and the Market Risk Premium (MRP) used in 2023 for 80 countries. We got answers for 102 countries, but we only report the results for 80 countries with more than 6 answers." *No data available for 2016. Value for 2017 collected from previous report.
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Social Science Research Network. (April 17, 2023). Average risk free rate (RF) on investments in the United Kingdom (UK) from 2015 to 2023 [Graph]. In Statista. Retrieved September 01, 2024, from https://www.statista.com/statistics/885750/average-risk-free-rate-united-kingdom/
Social Science Research Network. "Average risk free rate (RF) on investments in the United Kingdom (UK) from 2015 to 2023." Chart. April 17, 2023. Statista. Accessed September 01, 2024. https://www.statista.com/statistics/885750/average-risk-free-rate-united-kingdom/
Social Science Research Network. (2023). Average risk free rate (RF) on investments in the United Kingdom (UK) from 2015 to 2023. Statista. Statista Inc.. Accessed: September 01, 2024. https://www.statista.com/statistics/885750/average-risk-free-rate-united-kingdom/
Social Science Research Network. "Average Risk Free Rate (Rf) on Investments in The United Kingdom (Uk) from 2015 to 2023." Statista, Statista Inc., 17 Apr 2023, https://www.statista.com/statistics/885750/average-risk-free-rate-united-kingdom/
Social Science Research Network, Average risk free rate (RF) on investments in the United Kingdom (UK) from 2015 to 2023 Statista, https://www.statista.com/statistics/885750/average-risk-free-rate-united-kingdom/ (last visited September 01, 2024)
Average risk free rate (RF) on investments in the United Kingdom (UK) from 2015 to 2023 [Graph], Social Science Research Network, April 17, 2023. [Online]. Available: https://www.statista.com/statistics/885750/average-risk-free-rate-united-kingdom/