Moody’s, an influential credit rating agency, has removed its negative outlook on the UK, stating that “policy predictability has been restored” following the mini-Budget in 2020. S&P had already removed its negative outlook on the UK in April. Moody’s also noted that the UK had taken a more conciliatory approach to EU trade. Credit rating agencies evaluate a country’s likelihood of repaying its debts based on the strength of the economy and the effectiveness of government.
Moody’s stated that Chancellor Jeremy Hunt’s decision to reverse most of his predecessor’s tax cuts helped to form their decision, however, Brexit has slowed the UK’s bid to reduce inflation and it may not return to its 2% target until 2026. Moody’s highlighted that greater cooperation with the EU may also help reduce Brexit-related uncertainty which in turn could boost economic growth.
Following a disastrous mini-Budget last September that included £45bn of unfunded tax cuts, without forecasts from the government’s spending watchdog, the UK was downgraded by the three main credit ratings agencies. Lower credit ratings indicate higher risk, which can ultimately lead to higher interest rates. Aa3 is the fourth-highest rating on Moody’s scale – making it “very high quality and subject to very low credit risk”. The UK held the highest-possible rating of AAA from 1978 to 2013, until it was downgraded while George Osborne was chancellor.
While S&P removed its negative outlook on the UK in April and gives the country the third-highest level rating of AA, Fitch still has a negative outlook on the UK with its next assessment due on 1 December
Read the full article from The BBC here: Read More