UK spending plans, Brexit paralysis put rating at risk - Moody's

By Paul Sandle and William Schomberg LONDON (Reuters) - Moody's warned on Friday it might cut its rating on Britain's sovereign debt again, saying that neither of the main political parties in next month's election was likely to tackle high borrowing levels which Brexit had made even harder to fix. In a toughly worded statement, Moody's said the fissures in Britain's society and politics exposed by its still-unresolved decision to leave the European Union would be long-lasting. 'It would be optimistic to assume that the previously cohesive, predictable approach to legislation and policymaking in the UK will return once Brexit is no longer a contentious issue, however that is achieved,' the ratings agency said

Reuters November 09, 2019 06:06:36 IST
UK spending plans, Brexit paralysis put rating at risk - Moody's

UK spending plans Brexit paralysis put rating at risk  Moodys

By Paul Sandle and William Schomberg

LONDON (Reuters) - Moody's warned on Friday it might cut its rating on Britain's sovereign debt again, saying that neither of the main political parties in next month's election was likely to tackle high borrowing levels which Brexit had made even harder to fix.

In a toughly worded statement, Moody's said the fissures in Britain's society and politics exposed by its still-unresolved decision to leave the European Union would be long-lasting.

"It would be optimistic to assume that the previously cohesive, predictable approach to legislation and policymaking in the UK will return once Brexit is no longer a contentious issue, however that is achieved," the ratings agency said.

Moody's said Britain's 1.8 trillion pounds ($2.30 trillion) of public debt - more than 80% of annual economic output - risked rising again and the economy could be "more susceptible to shocks than previously assumed."

Both of the main political parties have promised big spending increases ahead of next month's election.

"In the current political climate, Moody's sees no meaningful pressure for debt-reducing fiscal policies," the ratings agency said.

Prime Minister Boris Johnson called the Dec. 12 election in an attempt to break the deadlock over how, and even if, the country should leave the EU, more than three years after the Brexit referendum.

Moody's said the "increasing inertia and, at times, paralysis that has characterized the Brexit-era policymaking process" showed how the UK's institutional framework has diminished.

Even once Britain was out of the EU, uncertainty would remain because of the "significant challenges" of reaching a future trade deal with the bloc, it said.

Any signs that Britain was unable to replicate the benefits of EU membership with trade deals in Europe and beyond would also be negative for the rating.

Moody's, which stripped the country of its AAA rating in 2013 and downgraded it again in 2017, said it was lowering the outlook on Britain's current Aa2 rating to negative from stable, meaning the rating could be cut again.

At Aa2, Britain is on the same level as France but below Germany's AAA rating by Moody's.

Moody's said the government, after reducing a budget deficit which leapt to 10% of GDP in 2010, had been increasingly willing to "move the goalposts" on making further progress.

"Successive governments have announced large, permanent increases in public expenditures, most notably a large increase in spending on the National Health Service, outside the normal calendar for fiscal policy changes and without detailed policy plans," it said.

Last month, ratings agency Standard & Poor's said it would cut Britain's AA credit rating if the country leaves the EU without a deal, and it, too, warned that Brexit indecision was causing government paralysis.

(Reporting by Paul Sandle and William Schomberg; Editing by Bill Berkrot and Leslie Adler)

This story has not been edited by Firstpost staff and is generated by auto-feed.

Updated Date:

TAGS:

Find latest and upcoming tech gadgets online on Tech2 Gadgets. Get technology news, gadgets reviews & ratings. Popular gadgets including laptop, tablet and mobile specifications, features, prices, comparison.

also read

South Africa's President Ramaphosa says travel to all international countries now permitted
World

South Africa's President Ramaphosa says travel to all international countries now permitted

JOHANNESBURG (Reuters) - South Africa's President Cyril Ramaphosa said on Wednesday that travel to all international countries will be permitted pending strict health protocols, despite having the highest number of confirmed COVID-19 cases on the continent. "We are also opening up international travel to all countries subject to the necessary health protocols and the presentation of a negative COVID-19 certificate," said Ramaphosa during a national address. Africa's most advanced economy, which has recorded more than 740,000 coronavirus infections and nearly 20,000 deaths, eased lockdown restrictions to their lowest level in September as the rate of new cases fell.

Palestinian baker keeps lion cubs as pets on Gaza rooftop
World

Palestinian baker keeps lion cubs as pets on Gaza rooftop

By Nidal al-Mughrabi KHAN YOUNIS, Gaza Strip (Reuters) - On the roof of an apartment block in one of Gaza's most crowded cities, two lion cubs prowl among the water tanks and dine on slaughtered chickens as children take selfies. It is a bizarre sight even in a war-scarred Gaza Strip that has become accustomed to the unaccustomed.

'We're not a colony': Mexican president stands firm on not recognizing Biden win
World

'We're not a colony': Mexican president stands firm on not recognizing Biden win

MEXICO CITY (Reuters) - Mexican President Andres Manuel Lopez Obrador on Wednesday dug in his heels as one of the few leaders of major countries yet to congratulate Joe Biden on his presidential election win, saying it was too early and that his country was "not a colony". Lopez Obrador, who accused rivals of electoral fraud in his presidential defeats in 2006 and 2012, says he has no side in the U.S. election, and will wait until legal challenges launched by the Trump administration over the vote have played out