UK's credit rating not at risk, says agency

The UK's gold-plated triple A credit rating is not at immediate risk as the British government steps up its drive to rebuild the shattered public finances, a leading agency said today.

Moody's said it believed Britain's economy was strong enough to withstand imminent swingeing public sector spending cuts and hang on to its top rating.

However, the group warned that the UK was still vulnerable to further economic and stock market shocks which could threaten the AAA rating, which it has so far maintained since the 1970s.

The agency's annual credit report on the UK said the recovery still faced major challenges as the banking sector is yet to return to normal following the financial crisis, and as export customers, such as those in Europe, struggle.

Kenneth Orchard, lead analyst for Moody's, said Britain's economy appeared "sufficiently flexible and robust" to grow at a moderate pace, despite these challenges and tough Government austerity measures.

He added: "Moody's stable outlook on the UK's AAA rating - implying that the rating is not expected to change in the foreseeable future - is largely driven by the Government's commitment to stabilise and eventually reverse the deterioration in its financial strength."

But the UK has lost its "cushion" since the banking meltdown and recession left it a ballooning deficit, according to Moody's.

Figures due tomorrow from the Office for National Statistics (ONS) are expected to confirm more pain for public finances in August, albeit with the pace of borrowing easing.

Philip Shaw, economist at Investec Securities, is pencilling in a further £13.1bn (€15.6bn) of borrowing last month, marking a small improvement on a year earlier.

Next month's spending review from the coalition government aims to reduce the debt to a sustainable level.

But it will still take years to get the public purse in order and Moody's said this left the UK fragile.

A relapse in the banking sector and out-of-control inflation pose potential risks to the UK given the state of national finances, the agency said.

Moody's first gave the UK its AAA rating in 1978, which has remained unchanged since then.

But agencies placed a so-called "negative outlook" on the rating in the aftermath of the financial crisis and as a result of towering national debt.

Last year, the world's biggest agency, Standard & Poor's, said the gold standard rating was under threat for the first time since it began assessing UK sovereign debt more than 30 years ago.

Prime credit ratings are vital to enable countries to borrow at affordable rates.

If a credit rating is downgraded, it could lead to higher borrowing costs as it makes international investors less likely to buy British Treasury bonds.

More in this Section

UCC business students to benefit from $1m philanthropic donationUCC business students to benefit from $1m philanthropic donation

Emirates announces deal for 20 more Airbus A350 planesEmirates announces deal for 20 more Airbus A350 planes

Irish renewable energy firm acquires Mayo windfarm for €37.2mIrish renewable energy firm acquires Mayo windfarm for €37.2m

Sage Group sells payment arm to US firm Elavon for €270mSage Group sells payment arm to US firm Elavon for €270m


‘Children of the Troubles’ recounts the largely untold story of the lost boys and girls of Northern Ireland, and those who died south of the border, in Britain and as far afield as West Germany, writes Dan Buckley.Loss of lives that had barely begun

With Christmas Day six weeks away tomorrow, preparations are under way in earnest, writes Gráinne McGuinness.Making Cents: Bargains available on Black Friday but buyer beware!

From farming practices in Europe to forest clearances in the Amazon, Liz Bonnin’s new show seeks solutions to some of the damage done by the world’s appetite for meat, writes Gemma Dunn.New show seeks solutions to some of the damage done by the world’s appetite for meat

Louis Mulcahy reads in Cork this weekend for the Winter Warmer fest, writes Colette Sheridan.Wheel turns from pottery to poetry

More From The Irish Examiner