Credit ratings agency Moody’s has lowered Britain’s credit status, citing waning fiscal and economic strength occasioned by the coronavirus pandemic and continued Brexit uncertainty. Increasingly, the UK is taking on debt at a rate faster than the economy and government revenue are growing.
Moody’s reviewed UK’s sovereign debt rating downward by a notch from Aa2 to Aa3, equivalent to a double –A minus rating from rival S&P Global, saying its outlook was “stable.”
“Even if there is a trade deal between the UK and EU by the end of 2020, it will likely be narrow in scope and therefore the UK’s exit from the EU will, in Moody’s view, continue to put downward pressure on private investment and economic growth,” Moody’s said Friday night.
Growth in the UK is anticipated to be “meaningfully weaker” than Moody’s had previously forecast; the UK economy had been striving to find a constant rhythm of growth amidst Brexit uncertainties even before the pandemic reared its ugly head in the country.
It is probable that the crisis will have a more devastating impact on the British economy than those of other big advanced countries, considering its huge dependence on services requiring human interaction, Moody stated.
Moody’s also warned of “the weakening in the UK’s institutions and governance.”
“While still high, the quality of the UKʼs legislative and executive institutions has diminished in recent years,” the agency said.
The downgrade, according to Pat Mcfadden, Treasury spokesperson for the opposition Labour Party, is a damning verdict on Boris Johnson and the Conservative Party’s economic stewardship.
“It is notable that the weakening of UK institutions and governance had been picked out as part of the reason for the downgrade.
“The ideological attack on our institutions being waged from No 10 is now having a direct impact on the economy. The prime minister should focus on securing the Brexit deal he promised rather than compounding the damage in the months ahead,” Mr Mcfadden said.
The pandemic has weighed enormously on public finances, the Conservative-controlled Treasury, UK’s equivalent of Nigeria’s Ministry of Finance, said, but added that situation could have worsened “had we not acted in the way we did to protect millions of livelihoods.”
The focus of the government’s intervention was to secure jobs and businesses and that “over time and as the economy recovers, the government will take the necessary steps to ensure the long-term health of the public finances.”
Moody’s analyst, Sarah Carlson, noted that headwinds from Covid-19 had subjected the UK economy to new and enormous strain.
Despite the projected recovery, we estimate a sharper peak-to-trough contraction for the UK than for any other G-20 economy,” she said.