Moody in new Brexit alert

Britain’s credit rating is at risk of a downgrade if it fails to preserve core elements of its access to the EU’s single market, ratings agency Moody’s has said.

“The UK’s Aa1 sovereign rating would be downgraded if the UK’s loss of access to the European Single Market following Brexit were to materially weaken medium-term growth and if the credibility of UK fiscal policy were to be undermined,” Moody’s said in a statement.

Moody’s assigned a negative outlook to Britain’s credit rating the day after the country voted to leave the EU, saying it expected heightened uncertainty and weaker confidence to slow growth.

Yesterday, Moody’s said the scale of the impact of Brexit on its growth prospects will depend on Britain’s new trading relationship with the EU.

“One scenario that Moody’s considers to be realistic is a series of accords offering access to the EU market for goods and more constrained access for services, in particular, financial services. However, such an outcome is far from certain,” it said.

Separate surveys published yesterday suggested UK house prices were cooling following the Brexit vote, while construction of new homes was on the increase.

British house prices were unchanged in October after rising in monthly terms each of the previous 15 months, mortgage lender Nationwide said.

Compared with October last year, prices rose 4.6%, slower than September’s increase of 5.3%. It was the slowest annual price growth since January, but Nationwide economist Robert Gardiner said it was still in line with rates since early 2015.

Howard Archer, an economist with Markit HIS, said he expected house prices to fall about 3% next year when Britain launches its negotiations to leave the EU, probably adding to uncertainty about the economy.

Britain’s construction industry hit a seven-month high in October as house building rose, but slowing order books and soaring prices for building materials darkened the outlook, a separate survey showed.

Markit-CIPS UK Construction Purchasing Managers’ Index rose unexpectedly to 52.6 from 52.3.