S&P stands firm on Britain’s triple-A rating
Ratings agency Standard & Poor’s reaffirmed UK’s coveted ‘AAA’ credit rating, but warned it will be at risk should UK economic growth fall short of its expectations.
By Richard Blackden
10:56PM BST 27 Jul 2012
Britain’s coveted ‘AAA’ credit rating will be at risk should UK economic growth fall short of its expectations, rating agency Standard & Poor’s has warned.
The warning came as the agency reaffirmed the UK’s top rating and the outlook on that rating as stable. The latter signals that S&P does not expect to make any changes to the rating soon.
After shrinking in the first half of the year, S&P expects UK growth to start recovering in the second half of the year as the debt crisis in Europe stabilises. Figures this week showed that the economy contracted a larger than expected 0.7pc in the second quarter.
While the rating agency expects the UK government to implement its fiscal consolidation plan, it added “we could lower the ratings if the pace and extent of fiscal consolidation slows beyond what we currently expect.” It added that a slowing could come from either “a reappraisal of our view of the government’s ability to implement its fiscal strategy or from significantly weaker economic growth than we currently expect.”
Although Chancellor George Osborne will welcome the confirmation of Britain’s top rating, he faces pressure both to get the economy expanding again as he sticks to the government’s deficit-reduction plan.
S&P last year stripped the US of its AAA rating, and on Friday, figures showed that America’s economy slowed in the second quarter as consumers chose to increase their savings.
The world’s largest economy expanded at an annual pace of 1.5pc in the second quarter, down from a revised 2pc in the first three months of the year, the Commerce Department said.
Americans put the brakes on their spending, with household consumption growing at an annual rate of 1.5pc, down from 2.4pc during a first quarter marked by buoyant job growth. The savings rate reached 4pc in the three months to the end of June, up from 3.6pc, and the strongest in a year.
“It is clear that the economy has come off the boil,” said Paul Dales, an economist at Capital Economics. Although the US is managing expansion that is eluding Britain and much of Europe, fears are growing that further momentum will be lost in the second half of the year.