Moody’s: Downgrades Britain’s credit outlook

Moody’s on Friday downgraded the UK sovereign debt outlook from “stable” to “negative”, following in the footsteps of the other two so-called major international credit rating agencies, S&P and Fitch, amid a political and economic crisis in the country following the resignation of Prime Minister and leader of the Conservative Party, Liz Truss.

This decision is due to the fact that London’s decisions are now more “unpredictable” at a time when the problems of the British economy are intensifying and inflation is increasing by leaps and bounds, the house explained in the press release it published.

The presentation of a controversial supplementary budget on September 23, then the withdrawal of almost all the measures announced and the resignation of Mrs Truss after just six weeks in Number 10 Downing Street “reflect” how “polarized and unpredictable” the “political environment in the UK,” Moody’s argued. Which could “undermine efforts to consolidate the budget” at a time when “measures may be needed to ease the cost of living,” he added.

The downgrade of the UK sovereign debt rating is also linked to the increased risks due to the weight of the sovereign debt.

The cost of long-term British government borrowing has risen, complicating the refinancing of public debt, at a time when inflation hovers around 10% — the highest in the G7 — and London is tipped to seek further government borrowing.

Britain’s “deterioration of policy credibility” is likely, leading to further interest rate hikes, Moody’s warned.

The US house kept the UK’s sovereign rating unchanged at Aa3. But the downgrade of the outlook signals its potential downgrade over the next 12 to 18 months.

RES-EMP

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