Moody’s downgrades UK’s debt rating on Brexit uncertainties, growth fears

COMPILED FROM WIRE SERVICES
ISTANBUL
Published 23.09.2017 00:38
Updated 23.09.2017 11:59
A file picture dated 13 July 2011 shows the Moody's logo outside the offices of Moody's Corporation in New York, New York, USA. (EPA Photo)
A file picture dated 13 July 2011 shows the Moody's logo outside the offices of Moody's Corporation in New York, New York, USA. (EPA Photo)

Moody's cut Britain's long-term credit rating Friday, citing economic uncertainty sparked by complex Brexit negotiations and the likelihood of weaker public finances.

The ratings agency cut the debt grade one notch to Aa2 from Aa1 with a stable outlook, which reflects expectations Britain's debt will "continue to rise," and worries that whatever trade agreement is reached with the European Union, even a "best-case scenario would not award the same access to the EU... that the UK currently enjoys."

Moody's predicted "weaker public finances going forward" as the government boosts welfare spending after several years of cuts and Prime Minister Theresa May's parliamentary coalition faces pressure to make good on promises to boost spending for Northern Ireland.

The ratings agency also expects Brexit and the loss of access to the single market to weigh on growth, saying it is "no longer confident that the UK government will be able to secure a replacement free trade agreement with the EU which substantially mitigates the negative economic impact of Brexit."

Britain has cut its budget deficit from about 10 percent of economic output in 2010 to 2.3 percent in the 2016/17 financial year which ended in March and the government hopes to bring down debt as a share of output from 2018/19.

Britain's government said Moody's assessment of the Brexit hit to the economy was "outdated" because British Prime Minister Theresa May had laid out an ambitious plan for future relations with the EU in a speech earlier on Friday.

"Overall, there was very little detail or progress in this speech, with a risk of continued uncertainty among businesses and investors," Barclays said in a note.

"Any continued delay in next week's negotiations may in turn dampen sentiment and the future investment and growth outlook."

The pound fell on the speech, which critics said did too little to clarify matters.

Moody's revised up its outlook on the country to stable from negative, meaning a further downgrade is not imminent.

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