Agencies: Credit Rating of the UK Still At Risk Over Disorderly Brexit

Photo by Michael Duxbury from Flickr

On Friday, Standard & Poor’s Global Ratings and Fitch both said that the credit ratings of the United Kingdom are still at risk because of Brexit, retaining the existing warnings of ‘negative outlook’ in place in their most recent assessments of the creditworthiness of the country.

The economy of Britain held up better compared to what most forecasters anticipated during the time of the Brexit vote in June 2016 to withdraw from the European Union, even though the figures published last Friday revealed that it started 2018 on a weak footing, partly because of heavy snowfalls.

Nevertheless, Brexit managed to dominate the assessments of the rating agencies, with S&P maintaining its AA rating for the United Kingdom unchanged but predicting that uncertainty regarding its future relationship with the European Union remained.

S&P stated: “We could lower the ratings if we view the risk of a disorderly Brexit as increasingly certain.

“We could revise the outlook to stable if negotiations with the EU move with greater certainty for the U.K., and if key sectors retain access to European markets without penalizing tariffs.”

The S&P dropped the United Kingdom of its top-notch rating of AAA briefly after the referendum decision in 2016.

The United Kingdom has been discussing a transition agreement with the European Union which means little will change for businesses immediately after Brexit took place in March 2019. It has also started negotiating the terms regarding the future trading relations that will be enforced after December 2020.

Fitch said that its negative outlook showed “continued, albeit reduced, downside risks of an acrimonious and disruptive exit from EU.” It also rates the United Kingdom at AA.

Earlier this week, official numbers showed that the United Kingdom recorded its lowest budget deficit, as a share of economic output, in 16 years during the financial year of 2017/18 .