On Friday, Standard and Poor’s and Fitch left their credit ratings for Britain unchanged. However, it remained gloomy regarding the outlook due to the possibility of the country reaching a bad deal in its Brexit talks with the European Union.
Having already removed Britain of its top-notch “AAA” rating, both agencies stuck with their “AA” rating for Britain. Although both warned that they were likely to downgrade again.
“The negative outlook reflects the continued institutional and economic uncertainty surrounding the Brexit negotiations and the UK’s future relationship with its largest market for goods and services, the EU,” said S&P in a statement.
A further downgrade could happen if S&P observes the possibility of a disorderly Brexit as increasingly certain or if overseas investors begin to withdraw the capital that finances the large current account deficit of Britain.
Fitch said that the lack of a clear British position and the European Union’s negotiating stance would make it difficult for Britain to come up with a favourable deal.
Both ratings agencies also referred to the weakened state of the government of Prime Minister Theresa May after she gambled her majority in parliament away in an election earlier in 2017 that she did not need to call.
“The election result is likely to weaken policy cohesion and creates uncertainty over the longevity of the UK government,” said Fitch.
“We believe that no single post-Brexit relationship with the EU commands either majority parliamentary or popular support.”