UK credit rating at risk of downgrade, Moody’s warns

UK credit rating at risk of downgrade, Moody’s warns

Wed Nov 2, 2016 5:46PM

Britain has been warned that its credit rating will be downgraded if it fails to secure access to the European Union’s single market during its upcoming Brexit negotiations.

In a report released on Wednesday, US credit ratings agency Moody’s said the loss of access to the EU single market would materially damage Britain’s economic growth.

“The UK’s Aa1 sovereign rating would be downgraded if the UK’s loss of access to the European Single Market following Brexit were to materially weaken medium-term growth and if the credibility of UK fiscal policy were to be undermined,” Moody’s said in a statement.

“One scenario that Moody’s considers to be realistic is a series of accords offering access to the EU market for goods and more constrained access for services, in particular financial services. However, such an outcome is far from certain,” it said.

Moody’s currently rates the UK as Aa1, which is the second-highest rating.

The credit rating agency assigned a negative outlook to UK’s credit rating the day after the country voted to leave the EU, saying it expected slower economic growth due to heightened uncertainty and weaker confidence.

British Prime Minister Theresa May is set to trigger the Brexit by March 2017, which will begin two years of formal negotiations on Britain’s exit from the EU.

Access to the single market and freedom of movement are expected to be the major sticking points in the negotiations.

Experts have warned that leaving the EU will severely hurt London’s position as a financial hub, unless the UK decides to keep its access to the single EU market by loosening its stance on immigration.

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