Moody's downgrades UK's rating on Brexit

Moody's downgrades UK's rating on Brexit

Specifically about Brexit, Moody's said it "believes that the United Kingdom government's decision to leave the EU single market and customs union as of 29 March 2019 will be negative for the country's medium-term economic growth prospects".

Moody's stripped Britain of its top-notch AAA rating in 2013.

It also sees Brexit eroding the country's economic strength.

Moody's has downgraded the UK's credit rating, citing concerns about public finances and the effect of Brexit.

Moody's predicted "weaker public finances going forward" as the government boosts welfare spending after several years of cuts and Prime Minister Theresa May's parliamentary coalition faces pressure to make good on promises to boost spending for Northern Ireland.

It said leaving the European Union was creating economic uncertainty at a time when the UK's debt reduction plans were already off course.

Moody's verdict will be grim reading for May and her finance minister Philip Hammond, who is under pressure to spend more in his budget plan, due in November.

It also agreed to above-budget pay increases for some public sector workers.

The credit agency said it did not believe the United Kingdom would generate the tax revenue necessary to pay for the rise in public spending.

That meant Britain was one of the few big European economies where the public debt ratio was likely to rise, probably peaking at about 93% of GDP in 2019, two years later than under the latest government plans.

Moody's was the first major credit ratings agency to strip the United Kingdom of its AAA rating in 2013 and it has now cut the rating from Aa1 to Aa2.

The "increasingly apparent challenges" of Brexit also dragged down the rating, with the firm saying it no longer expected a replacement free trade deal to be negotiated. After the downgrades, Moody's changed its outlook on United Kingdom ratings to stable from negative.