UK

Britain’s credit rating downgraded from AAA to Aa1

by James Hurley, The Telegraph  |  published on February 25, 2013

Moody’s announced on Friday night that it had cut the Government’s bond rating one notch from ‘Aaa’ – the highest possible level – to ‘Aa1’.

The move is a significant setback for Chancellor George Osborne, who has faced criticism that his strategy for dealing with UK’s huge debt burden is failing to deliver.

Moody’s pointed to “continuing weakness in the UK’s medium-term growth outlook, with a period of sluggish growth which [it] now expects will extend into the second half of the decade”.

The credit ratings agency also noted that the Government’s debt reduction programme faced significant “challenges” and that the UK’s huge debts are unlikely to “reverse before 2016”.

Moody’s said that despite considerable structural economic strengths, growth is expected to be sluggish due to a combination of weaker global economic activity and the drag on the UK economy “from the ongoing domestic public- and private-sector deleveraging process.”

However, Moody’s, which is the first ratings agency to lower the UK from the highest rating, said the outlook on UK debt is stable.

Mr Osborne responded to the downgrade by insisting he would not change course on the Government’s austerity programme.

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