Following the mini-budget, leading rating agency Fitch lowered the outlook for its credit rating on UK government debt from “stable” to “negative” earlier this month.
Moody’s rating agency has downgraded the United Kingdom’s financial outlook to negative while maintaining its Aa3 sovereign rating.
The agency downgraded the outlook for the United Kingdom from stable to negative on Friday, citing policy uncertainty amid high inflation and weakening GDP prospects.
Moody’s stated that the government’s “ability to inspire confidence in its commitment to fiscal discipline” will be a factor in the “resolution of the negative outlook.”
In addition, the unaltered Aa3 grade “reflects the United Kingdom’s economic resilience, which is backed by its prosperous, competitive, and diverse economy.”
Additionally, the paper identified “risks to the UK’s debt affordability from expected greater borrowing and the risk of a persistent deterioration in policy credibility.”
On September 23, former chancellor Kwasi Kwarteng announced permanent, unfunded tax cuts totaling over £45 billion combined with an expensive plan to regulate energy prices for households and businesses.
The move drove sterling and bond markets into a spiral and sparked a political crisis, which resulted in Liz Truss sacking Mr. Kwarteng, canceling nearly all planned tax cuts, and then announcing her retirement.
In response to the mini-budget, leading rating agency Fitch lowered the outlook for its credit rating on UK government debt from “stable” to “negative” earlier this month.
It maintained its overall grade of AA-, with AAA being the highest possible grade.
It was stated that the change reflected growing anxiety over the quantity of borrowing required to fund the monthly tax and expenditure pledges made by the chancellor in the House of Commons. Fitch unveiled its decision days after rival Standard & Poor’s made a similar step.
Jeremy Hunt, the next British chancellor, has stated that he will do “whatever it takes” to restore confidence in the nation’s public finances.
On October 31, he will propose a plan to reduce the public debt as a proportion of economic output over the medium term.
