Another Brexit blow as Britain’s crucial credit rating is under threat

PUBLISHED: 12:29 12 July 2017

PA Archive/PA Images

PA Archive/PA Images

PA Archive/PA Images

Uncertainty over the final outcome of Brexit negotiations has left Britain’s healthy credit rating “under pressure”.

Moody’s, one of the worlds leading rating agencies, said it remained unclear whether the Government would be able to deliver a “reasonably good outcome” from Brexit, and warned that growth prospects over the medium term will be “materially weaker” if it fails to secure good access to the single market after withdrawal from the EU.

While the “base case scenario” remains that the UK and EU will forge a free trade agreement, the chances of an “abrupt and damaging” exit under World Trade Organisation rules has increased as a result of the Government pursuing a Hard Brexit, said the agency’s annual report on the UK.

Moody’s warned that the British economy is likely to weaken “significantly” over the remainder of 2017, with GDP growth forecast to fall from 1.8% in 2016 to 1.5% this year and 1% in 2018, due to falling demand from household consumption and “persistently weak capital formation”.

Political and fiscal risks have heightened as a result of the loss of Theresa May’s parliamentary majority in the snap election, which led the Government to drop a number of cash-saving proposals and resulted in “significant” pressure for increased public spending.

The UK’s sovereign rating of Aa1 negative - reduced from stable following last year’s EU referendum - could be downgraded further if the progress of Brexit negotiations suggested the Government might not be able to preserve core elements of single market access, said Moody’s.

However, a trade agreement limiting the economic fallout from Brexit could see it revised back up to stable.

“While the negotiations with the EU have recently started, it remains unclear whether the UK Government can eventually deliver a reasonably good outcome for the UK,” said Moody’s senior vice president Kathrin Muehlbronner, the author of the report.

“The likelihood of an abrupt - and damaging - exit with no agreement and reversion to WTO trading rules has increased compared to our expectation directly after the referendum, with the Government so far pursuing objectives that imply a ‘hard’ exit.”

Support The New European's vital role as a voice for the 48%

The New European is proud of its journalism and we hope you are proud of it too. We believe our voice is important - both in representing the pro-EU perspective and also to help rebalance the right wing extremes of much of the UK national press. If you value what we are doing, you can help us by making a contribution to the cost of our journalism.

  • Become a friend of The New European for a contribution of £48. You will qualify for a mention in our newspaper (should you wish)
  • Become a partner of The New European for a contribution of £240. You will qualify for a mention in our newspaper (should you wish) and receive a New European Branded Pen and Notebook
  • Become a patron of The New European for a contribution of £480. You will qualify for a mention in our newspaper (should you wish) and receive a New European Branded Pen and Notebook and an A3 print of The New European front cover of your choice, signed by Editor Matt Kelly

By proceeding, you agree to the New Europeans supporters club Terms & Conditions which can be found here.



Supporter Options

Mention Me in The New European



If Yes, Name to appear in The New European



Latest Articles

Podcast

Trending

Newsletter Sign Up

Sign up to receive our regular email newsletter