Rating agencies threaten to downgrade UK credit following decision to leave European Union

Posted by News Express | 25 June 2016 | 2,470 times

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Major rating agencies on Friday warned of downgrades to the U.K.’s credit following vote by Britons to leave the European Union.

Moody’s Investors Service left unchanged the EU’s rating but changed the UK to “negative” after the Brexit result.

The EU’s long-term rating was affirmed at the highest Aaa level, Moody’s said in a statement where it underlined the commitment of EU members to the financial stability of the Union.

“Moody’s does not expect that the UK’s vote to leave and its eventual exit will alter either the capacity or the willingness of those very highly rated members to continue to honour their obligations to support the EU,” the statement read.

“Excluding the U.K., approximately 64 percent of the total contributions to the EU budget come from members that are rated between the Aaa and Aa3 range,” it added.

While the EU’s outlook was kept at “stable”, the UK’s was lowered to “negative” following the Brexit vote.

Moody’s said the British referendum to leave the 28-nation bloc “will herald a prolonged period of uncertainty for the U.K.” and “diminished confidence and lower spending and investment to result in weaker growth.”

Meanwhile, another global rating agency, Standard & Poor’s, said Friday that it would review the rating of the U.K because the vote to leave the EU would deter investment in Britain’s economy, decrease demand for sterling reserves, and put the British financial services sector at a competitive disadvantage, that could adversely affect its growth.

“We could lower the rating by more than one notch if we believed that the U.K.'s institutional strength and ability to formulate policy conducive to sustainable growth were negatively

affected,” Standard & Poor’s said in a statement.

And Fitch Ratings said the referendum result could mean weaker investment and more uncertainty for the U.K.

“Brexit will be moderately credit negative for the UK and ... we will review the sovereign rating shortly,” it said, adding that Britain’s financial sector could be negatively affected from higher import costs and pressure on exports. (Anadolu Agency)

Source: News Express

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