The Treasury struck back at Moody’s downgrade of the credit rating for Britain. It argued that the firm’s assessments regarding Brexit are “outdated.”
Moody’s stated that Brexit would complicate policymaking and damage prospects for economic growth, putting the plans of the Government to fix the public finances that are in question, with an expected increase in debt levels.
However, a spokesperson from the Treasury stated: “The assessments made about Brexit in this report are outdated. The prime minister has just set out an ambitious vision for the UK’s future relationship with the EU, making clear that both sides will benefit from a new and unique partnership.
“We have made substantial progress in reducing the deficit while finding extra money for the NHS and social care at the same time. We are not complacent about the challenges ahead, but we are optimistic about our bright future.”
The decline to Aa2 was announced on the same day as the Brexit speech of Prime Minister Theresa May on Florence, Italy. The new rating is two notches below the rating of triple A that Britain had for 35 years up until 2013. The decision was made on Tuesday, so it did not consider the content of the prime minister’s speech.
During the wake of the referendum last year, other rating agencies, namely S&P and Fitch, both downgraded Britain’s finances. In the same statement, Moody’s also changed the UK’s outlook to stable from negative. This means that a further downgrade is not likely to happen.
The rating agency asserted that the decision to withdraw from the European Union’s single market and customs union would become “negative for the country’s medium-term economic growth prospects.” It continued that it anticipated “weaker public finances going forward, partly linked to the economic slowdown under way but also reflecting the increasing political and social pressures to raise spending after seven years of spending cuts.”
The agency also stated that the fact that the Government did not have an overall majority in Parliament “further obscures the future direction of economic policy”.