Date
30 March 2017
Dark clouds hover over Britain's economy in the wake of its vote to leave the EU, according to two major rating agencies. Photo: The Economist
Dark clouds hover over Britain's economy in the wake of its vote to leave the EU, according to two major rating agencies. Photo: The Economist

Brexit fallout: Britain loses remaining topnotch credit rating

Britain took more blows to its economy when two top rating agencies downgraded its sovereign credit score after last week’s vote to leave the European Union.

Standard & Poor’s stripped Britain of its last remaining top-notch credit rating, slashing it by two grades from “AAA” to “AA” and warning more downgrades could follow.

Fitch Ratings also downgraded its ranking for Britain’s creditworthiness by one notch and similarly said more cuts could follow.

The rating agencies affirmed the market’s view of the Brexit vote.

Sterling tanked to a 31-year low against the US dollar on Monday and stock markets fell for a second trading day since the referendum last Thursday.

It was the first time S&P had chopped an AAA-rated sovereign credit rating by two notches in one move.

“In our opinion, this [referendum] outcome is a seminal event, and will lead to a less predictable, stable, and effective policy framework in the UK,” S&P said in a statement.

Finance minister George Osborne said the British economy was strong enough to cope with the volatility caused by Thursday’s referendum.

But the vote has plunged the country into a political crisis, with the ruling Conservative Party looking for a new leader after Prime Minister David Cameron said he would stay on until October, delaying the launch of negotiations with the EU and leaving the country’s economic prospects under a cloud of uncertainty.

The added prospect of a new independence referendum in Scotland, which voted strongly to stay in the EU, threatens the constitutional and economic integrity of the United Kingdom, S&P warned.

Fitch more than halved its growth forecast for Britain’s economy in 2017 and 2018 to just 0.9 percent for both years, from 2.0 percent previously.

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