Fidelity Worldwide Investment has urged the government to ease the pace of austerity after the UK’s loss of its prized triple-A credit rating on Friday night.
Rating agency Moody’s on Friday downgraded the UK from AAA to AA1, citing ‘continuing weakness in the UK’s medium-term growth outlook’ and concerns over debt levels.
Trevor Greetham (pictured), Fidelity asset allocation director, said ‘inflexible allocation of front-loaded austerity’ was in part to blame for the downgrade. ‘Government, consumers and the banking system cannot all attempt to deleverage against a weak global backdrop without damaging the economy,’ he said.
Sovereign debt analyst Tristan Cooper said the government should respond by easing the pace of fiscal consolidation, together with further quantitative easing. ‘The aim would be to boost growth a bit before the 2015 election,’ he said. ‘They won’t be too concerned by a further decline in sterling’.
Fixed income global chief investment officer Andrew Wells added that the downgrade had been priced in by the markets. ‘The UK’s downgrade from triple-A is very much priced-in and anticipated by professional investors,’ he said. ‘Changing debt-to-GDP ratios are likely to see more events like this in 2013 from markets traditionally perceived as “high quality”.’