Fitch Ratings has released a formal downgrade warning to the United Kingdom, which pointed to heightened risks that the country could tumble out of the European Union without a formal agreement in place.
In a shocking move that came outside of its normal ratings calendar, Fitch placed the AA grade on a rating watch negative. It said that a no deal result, or a new relationship with the European Union that “undermines” the British economy, may result in a downgrade.
The United Kingdom is scheduled to leave the bloc — with or without a deal — on the 29th of March, and Fitch indicated that it will examine to make a decision on the rating in the first half of the year.
It stated: “A ‘no-deal’ Brexit would lead to substantial disruption to U.K. economic and trade prospects, at least in the near term.”
The statement mentioned “heightened uncertainty.” It added that avoiding a chaotic exit could remove the risk of a cut.
Concerns over the economic future of the UK has been growing as Theresa May, the British Prime Minister, scrambles to get new concessions from the bloc in order to put a reformed divorce deal to a vote in the House of Commons as soon as next week. Yesterday, she was dealt a blow with the defection of three high-profile members from her Conservative Party, who will be joining a group of former Labour politicians who also stepped down from their party.
Fitch said that the scope for a fundamental renegotiation of the withdrawal agreement seems to be limited and that for an accord to be approved by the U. ahead of the Brexit deadline, “the government would need to substantially widen its support.”
It added that while an extension of the Article 50 withdrawal process may be possible, it would need the agreement of the member states of the EU.
Fitch stated: “The macroeconomic outlook is highly sensitive to Brexit developments in the next few weeks,”
After the statement, the pound fell against the dollar,