Yesterday the UK lost its top AAA credit rating from Standard & Poors and Fitch as a result of the vote to leave the European Union.
The decision arrived shortly after Chancellor George Osborne said that the UK is “about as strong as it could be” to confront future economic challenges.
The ratings agency Standard & Poor said:
“In our opinion, this outcome is a seminal event, and will lead to a less predictable, stable, and effective policy framework in the UK,”
“The negative outlook reflects the risk to economic prospects, fiscal and external performance, and the role of sterling as a reserve currency, as well as risks to the constitutional and economic integrity of the UK if there is another referendum on Scottish independence,”
Rival agency’s Fitch and Moody’s also downgraded the UK’s rating from AA to AA+ having already removed Britain’s status as an AAA rating before the referendum campaign started.
In a statement released yesterday Fitch said:
“Fitch believes that uncertainty following the referendum outcome will induce an abrupt slowdown in short-term GDP growth, as businesses defer investment and consider changes to the legal and regulatory environment.”
“Medium-term growth will also likely be weaker due to less favorable terms for exports to the EU, lower immigration and a reduction in foreign direct investment. An adjustment in the value of sterling and changes in the business environment could also affect growth.”
The loss of a Triple – A rating is the latest in a number of blows to the economy as sterling recently plunged to its lowest point in 31 years following the Brexit vote while the equity markets try to overcome the crisis.
The decision means that Britain’s position on the international market is at a greater risk as the move will inevitably effect how much the government can borrow on the international stage.
28/06/16
