United Kingdom Loses Top AAA Credit Rating
The UK has lost its top AAA credit rating for the first time since 1978 on expectations that growth will “remain sluggish over the next few years”.
Moody’s said the key interrelated drivers of the action are:
1. The continuing weakness in the UK’s medium-term growth outlook, with a period of sluggish growth which Moody’s now expects will extend into the second half of the decade;
2. The challenges that subdued medium-term growth prospects pose to the government’s fiscal consolidation programme, which will now extend well into the next parliament;
3. And, as a consequence of the UK’s high and rising debt burden, a deterioration in the shock-absorption capacity of the government’s balance sheet, which is unlikely to reverse before 2016.
Moody’s explained that the “UK’s creditworthiness remains extremely high, rated at Aa1, because of the country’s significant credit strengths. These include (i) a highly competitive, well-diversified economy; (ii) a strong track record of fiscal consolidation and a robust institutional structure; and (iii) a favourable debt structure, with supportive domestic demand for government debt, the longest average maturity structure (15 years) among all highly rated sovereigns globally and the resulting reduced interest rate risk on UK debt.”
“The stable outlook on the UK’s Aa1 sovereign rating reflects Moody’s expectation that a combination of political will and medium-term fundamental underlying economic strengths will, in time, allow the government to implement its fiscal consolidation plan and reverse the UK’s debt trajectory.
“Moreover, although the UK’s economy has considerable risk exposure through trade and financial linkages to a potential escalation in the euro area sovereign debt crisis, its contagion risk is mitigated by the flexibility afforded by the UK’s independent monetary policy framework and sterling’s global reserve currency status,” Moody’s noted.
The full statement from Moody’s is here [PDF].
Not one comment. Hmmmmmm. thats odd. Because pre election all the talk from the UBP/OBA was that ONLY Bermuda was stil in recession.
Remember it was all the PLP fault.
So who shall we blame for the mother countrys troubles?
no surprise, what took Moodys so long..How long will this plan last?..so easy to eliminate the inflation because its a matter of a decision, just as it was a decision to have inflation at the 99% expense..Let Buckingham Palace take a huge cut in unnecessary building expense, holdongs, useless trips, cut photo ops cos no one is asking for them anymore..the throne is merely a facade, they do not even sign directly, parliament does the work and they are costing the world far too much in economics and have outlived their momentum, the thrill is ill…high tax and cutbacks for military defence is no longer an attraction, come clean 1% own up to your dastardly deeds and prove that you have some quality besides your god complexs to dominate and control. Not falling for the inflation scare tactic anymore, try something new, there is enough money and food and everything for everbod MAKE IT HAPPEN!