Moody's cuts UK's credit rating citing finances, Brexit

Reuters

Reuters

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 first downgraded Britain from AAA in 2013 as it claimed "growth would be sluggish over the next few years".

The outlook for the U.K.'s public finances has deteriorated significantly in recent months, with the government's fiscal consolidation plans increasingly in question, Moody's said.

Proponents of Brexit have suggested that the pound's decline could boost overseas demand for British products, strengthening the manufacturing industry and decreasing the economy's reliance on domestic demand.

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

"Having looked at Theresa May's speech, I don't think there is anything in there which would in any way make us change our assessment", Alastair Wilson, managing director of global sovereign risk at Moody's, told BBC radio on Saturday.

Brexit was likely to dominate the legislative process for the foreseeable future, making any innovative legislation needed to help public services without increasing budgets unlikely.

At the same time, budget pressures would rise as Britain's economy slowed due to Brexit, with growth of just 1% likely next year, down from 1.8% in 2017 and not recovering to its historic trend rate over the coming years.

Moodys have downgraded United Kingdom debt to AA2, the lowest ever credit rating for United Kingdom citing "Brexit challenges" as the main reason for the drop.

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.

Moody's has also changed the UK's long-term issuer and debt ratings to "stable" from "negative".

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