Legal & General Investment Management believes the UK's debt position means a ratings downgrade is inevitable.
Speaking after data showed unemployment hit a 17-year high in the UK, LGIM said it expects UK's top AAA-rating will be reviewed over the coming years as the government struggles to meet its forecasts.
According to the Daily Telegraph LGIM economist James Carrick said that while quantitative easing may help growth in the short term, over the longer term the economy still remains in trouble.
'Under all scenarios, we think the Chancellor will miss his projections,' Carrick said. 'We expect the debt-to-GDP ratio to remain on an explosive path no matter what the government does.'
He said only the 'biggest private sector boom' ever could prevent a downgrade to compensate for the largest fiscal squeeze since the WW II, a scenario he thinks is unlikely as the UK falls back into recession.
'The private sector will have to grow not just at its fastest rate in one year, but for four in a row,' Carrick said.
He also highlighted the struggle banks will face in this climate. 'It's very difficult to get a boom when credit is restrained,' he said.