Economy

Moody's cuts UK's credit rating citing finances, Brexit

Moody's cuts UK's credit rating citing finances, Brexit”

Ratings agency Moody's downgraded Britain's credit rating by a further notch on Friday, saying the government's plans to fix the public finances had been knocked off course and Brexit would weigh on the economy.

The agency on Friday said it was cutting its long-term debt rating on the United Kingdom one notch to Aa2, its third-highest investment-grade rating. "While future years may see some recovery, Moody's expects growth of just 1% in 2018 following 1.5% this year and 2.25% on average in recent years", the rating agency said.

"Since 2015, the government has been finding it increasingly hard to implement the spending cuts that it has been targeting, in particular on welfare spending".

"While these additional expenditures will be funded out of current budgets, the pressure to continue to increase spending in the coming years is likely to remain high, in particular on health care and the public sector wage bill".

Meanwhile, fiscal pressures will be exacerbated by the erosion of the British medium-term economic strength that is likely to result from the manner of its departure from the European Union, and by the increasingly apparent challenges to policy-making given the complexity of Brexit negotiations and associated domestic political dynamics, added the release.

Downing Street said the firm's Brexit assessments were "outdated".

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 United Kingdom government will be able to secure a replacement free trade agreement with the European Union which substantially mitigates the negative economic impact of Brexit".



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