UK warned about credit rating downgrade

The Fitch credit ratings agency has done the same as Moody’s and placed the UK’s top AAA rating on negative outlook, reports the BBC.

Fitch Ratings warned that it may downgrade the UK over the next few years should the government not be able to contain the public debt level. The warning arrives as Chancellor George Osborne adds the finishing touches to his Budget, which is set to be delivered next week.

In theory, a credit rating determines the borrowing costs of a country. Fitch said that the UK did have a strong commitment to work towards reducing the budget deficit as well as an economy which was underpinned by a diversified, flexible and high-income economy, but that its fiscal space was very limited in terms of absorbing any more adverse economic shocks.

Fitch said that in light of the uncertainty around the fiscal and economic outlook, including the risks which are posed to the economic recovery by continuing financial tensions within the eurozone and against a backdrop of what is still a high structural budget deficit and large and increasing government debt, the Negative Outlook highlights a slightly greater than 50 per cent possibility of a downgrade over the next two years.