Published: Sat, September 23, 2017
Money | By Armando Alvarado

UK's credit rating downgraded by Moody's amid concern over Brexit pressures

UK's credit rating downgraded by Moody's amid concern over Brexit pressures

Moody's first downgraded Britain from AAA in 2013 as it claimed "growth would be sluggish over the next few years".

Moody's has downgraded the UK's credit rating, citing concerns about public finances and the effect of Brexit.

Moody's said leaving the European Union was creating economic uncertainty at a time when the UK's debt reduction plans were already off course. The short-term issuer ratings were affirmed at Prime-1.

But a Moody's official said the speech made no difference to the agency's gloomy long-term view for Britain's economy.

Moody's verdict will be grim reading for May and her finance minister Philip Hammond, who is under pressure to spend more in his budget plan, due in November.

Brexit was likely to dominate the legislative process for the foreseeable future, making any innovative legislation needed to help public services without increasing budgets unlikely.

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Britain's government said Moody's assessment of the Brexit hit to the economy was "outdated" because British Prime Minister Theresa May had laid out an ambitious plan for future relations with the European Union in a speech earlier on Friday.

It says revenues were unlikely to compensate for the higher spending. Moody's forecasts the United Kingdom economy growing just 1 percent in 2018 after 1.5 percent growth this year, adding that it doesn't expect growth to recover to its historic trend rate in the coming years.

The "increasingly apparent challenges" of Brexit also dragged down the rating, with the firm saying it no longer expected a replacement free trade deal to be negotiated.

The sheer workload of Brexit in the coming years meant the government would struggle to fix Britain's weak productivity growth, the Achilles heel of the economy, it said.

Moody's, one of the major ratings agencies, downgraded the United Kingdom to an Aa2 rating from Aa1 on Friday, BBC reported.

Moody's changed its outlook on the country from negative to stable, meaning another downgrade is not imminent.

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