Hot Features
Premium
Register for streaming realtime charts, analysis tools, and prices.
The UK has lost its AAA credit rating following Moody’s downgrade
Rating’s agency Moody’s has downgraded the United Kingdom from AAA to Aa1 following slow growth and increasing national debt, saying that it believes “the risks to the growth outlook remain skewed to the downside”.
Whilst noting that it had “considerable structural economic strengths” Moody’s said in a statement that there was “increasing clarity” that the UK’s economic growth “will remain sluggish over the next few years”.
The downgrade marks the first time since 1978 that the UK has not had a AAA rating from both Moody’s and Standard and Poor’s.
Speaking after the downgrade the UK’s senior economics minister, Chancellor of the Exchequer George Osborne, argued that Moody’s decision was a “stark reminder of the debt problems facing our country – and the clearest possible warning to anyone who thinks we can run away from dealing with those problems”.
“Far from weakening our resolve to deliver our economic recovery plan, this decision redoubles it”, the Chancellor said.
In explaining their decision Moody’s, who also downgraded the Bank of England from AAA to Aa1, raised concern that the UK economy is struggling due to the on-going global financial problems and the consequences of government actions to reduce the national debt, but acknowledged that “the government’s recent Funding for Lending Scheme has the potential to support a surge in growth”.
Mr Osborne, who is due to set the UK government’s budget for the next financial year in March, stressed though that the UK is unlikely to significantly change its economic policy saying “We are not going to run away from our problems, we are going to overcome them”.
“We will go on delivering the plan that has cut the deficit by a quarter, and given us record low interest rates and record numbers of jobs”, he added.
UPDATE:
21:00 25/02/2013
Britain not changing course after credit downgrade and sterling falls
Increasing pressure on UK Chancellor after Moody’s downgrade and sterling concern.
The UK’s senior economics minister George Osborne has said the government will “redouble its efforts” to reduce the country’s debts after rating’s agency Moody’s downgrade the UK from AAA to Aa1.
Speaking in a House of Commons debate Mr Osborne argued that the rating decision was “a warning to those who do not want to deal with debt”. Citing the stable performance of London market following the downgrade the Chancellor said the government would maintain its central policy of economic policy of austerity to reduce its financial deficit.
“Ultimately that is the choice for Britain: we can either abandon our efforts to deal with our debt problems and make a difficult situation very much worse, or we can redouble our efforts to overcome our debts”, the Chancellor stated.
Following the downgrade the pound has come under increasing pressure, falling to a two-and-a-half year low against the US dollar and a 16-month low against the euro. During 2013 the pound has lost 7% of its value against both the dollar and euro.
Mr Osborne stated that the national situation would be “much worse” if the government, comprised of a coalition between the Conservatives and Liberal Democrats, implemented the policies advocated by the opposition Labour Party.
Shadow Chancellor Ed Balls argued during the debate that the government was in “complete denial” about situation.
The commons debate follows remarks by the Business Secretary, Vince Cable, who argued that Moody’s downgrade was “largely symbolic” and that there “positive” signs for the UK economy, including falling employments figures and increased exports.
“In terms of the real economy, there is no reason why the downgrade should have any impact” said Dr Cable.
Announcing their decision to downgrade the UK’s credit rating Moody’s said that following slow growth and increasing national debt that it believes “the risks to the growth outlook remain skewed to the downside”.
