Fitch has warned that the UK’s triple-A credit rating is at risk as the government is failing to control debt.
The UK’s inability to meet public debt targets ‘weakens the creditability’ of its AAA status according to the ratings agency after yesterday’s Autumn Statement from chancellor George Osborne.
In the statement Osborne announced that austerity is due to continue until 2018, a year longer than expected, and debt as a proportion of the country’s output will not fall until 2016-2017.
Growth forecasts were also cut by the Office for Budget Responsibility (OBR) for the next five years, and expectations for this year were slashed from 0.8% to -0.1%.
The loss of the AAA status would mean that the UK’s sovereign debt, or gilts, would be perceived as more risky by investors and could impact the bond market.
However Fitch threatened to downgrade the country’s credit rating in March if debt levels weren’t under control in the next two years and added that the Autumn Statement confirmed the scale of the problem facing the UK.
Fitch added: ‘The government has chosen not to chase the supplementary target by deploying additional consolidation measures over the next two years. In our view, missing the target weakens the credibility of the UK's fiscal framework, which is one of the factors supporting the [AAA] rating.’
Other agencies have also been eyeing the country’s credit rating. Moody’s threatened to downgrade the UK in February and will review its status early in the New Year, whilst Standard & Poor’s affirmed the AAA rating in July based on projected stronger economic growth.
Fitch will formally review the rating in March 2013, after the Budget.