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Moody's cuts UK credit rating on Brexit fears

Rating agency blames Brexit uncertainty and an easing of the austerity programme for a more negative outlook.

Moody's cuts UK credit rating on Brexit fears

Moody's has cut its credit rating on the UK, blaming Brexit uncertainty and an easing of the austerity programme for a more negative outlook.

Moody's cut to its rating, from Aa1 to Aa2 rating, follows downgrades from other agencies last year. S&P took the UK down from AAA to AA, and Fitch from AA+ to AA.

Moody's has pointed to several factors:

  • Public spending: it said the government ‘yielded to pressure and raised spending in several areas’ such as health and adult social care a well as ‘above budget’ pay increases for some public sector workers.
  • A hung parliament: prime minister Theresa May’s failure to win an overall majority in this year’s election ‘further obscures the future direction of economic policy’ it said.
  • Brexit: Moody's said an ‘erosion of the UK’s medium term economic strength’ was likely to result from its departure from the EU ‘and by the increasingly apparent challenges to policy-making given the complexity of Brexit negotiations and associated domestic political dynamics'.

The decision to downgrade was made on 19 September, before the prime minister’s speech in Florence last Friday, in which she set out her aims for a two-year transition period.

Responding to the downgrade, the government said: ‘The prime minister has just set out an ambitious vision for the UK's future relationship with the EU, making clear that both sides will benefit from a new and unique partnership.

Adding: ‘The foundations on which we build this partnership are strong.’

You can read the full statement from Moody's here.

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