Moody's warns: Brexit paralysis puts UK rating at risk
LONDON – Moody’s warned on Friday that it might cut its rating on Britain’s sovereign debt again, saying that neither of the main political parties in next month’s election was likely to tackle high borrowing levels which Brexit had made even harder to fix.
In a toughly worded statement, Moody’s said the fissures in Britain’s society and politics exposed by its still-unresolved decision to leave the European Union would be long-lasting.
“It would be optimistic to assume that the previously cohesive, predictable approach to legislation and policymaking in the UK will return once Brexit is no longer a contentious issue, however that is achieved,” the ratings agency said.
Moody’s said Britain’s £1.8 trillion ($2.30 trillion) of public debt – more than 80 percent of annual economic output – risked rising again and the economy could be “more susceptible to shocks than previously assumed.”
Both of the main political parties have promised big spending increases ahead of next month’s election.
“In the current political climate, Moody’s sees no meaningful pressure for debt-reducing fiscal policies,” the ratings agency said.
AAA rating in 2013 and downgraded it again in 2017, said it was lowering the outlook on Britain’s current Aa2 rating to negative from stable, meaning the rating could be cut again.
At Aa2, Britain is on the same level as France but below Germany’s AAA rating by Moody’s.
Moody’s said the government, after reducing a budget deficit which leapt to 10 percent of gross domestic product (GDP) in 2010, had been increasingly willing to “move the goalposts” on making further progress.
“Successive governments have announced large, permanent increases in public expenditures, most notably a large increase in spending on the National Health Service, outside the normal calendar for fiscal policy changes and without detailed policy plans,” it said.
Last month, ratings agency Standard & Poor’s said it would cut Britain’s AA credit rating if the country leaves the EU without a deal, and it, too, warned that Brexit indecision was causing government paralysis.Reuters