Ratings agency Moody’s has slashed the UK’s credit rating from Aa1 to Aa2.
This was the biggest reason for the rating downgrade.
The firm said that “economic uncertainties” created by the UK’s planned withdrawal from the EU justified the move.
Then there’s the government being off target on dealing with its debt reduction plans.
And with austerity under increasing pressure, illustrated by the recent breach of the public sector pay cap, expectation that the UK will meet its deficit elimination goal has receded. That’s on top of the fact that Brexit will dominate the political agenda over this parliament, meaning debt reduction policies aren’t expected to be a priority.
Spending has also increased in health and social care.
Remember those critics who said that any trade deals, like the proposed UK-Japan agreement, would take years to complete?
Moody’s agrees with the naysayers.
They fear that the UK will be economically vulnerable during the period when it is outside of the EU. And the agency doesn’t see the UK maintaining its current level of access to the single market, whatever the negotiation result.
The government thinks Moody’s rationale is “outdated,” citing Prime Minister May’s Florence Speech as an “ambitious vision for the UK’s future relationship with the EU.”