PARIS — U.S. rating agency Moody’s has downgraded Britain’s credit rating by one notch, citing the impacts of the country’s exit from the European Union as well as the coronavirus pandemic.
Moody’s now ranks Britain’s long-term debt as Aa3 rather than Aa2, though it has also upgraded the outlook for this rating from “negative” to “stable,” the agency announced in Paris late on Friday.
Britain’s economic strength has declined since its credit was first downgraded in 2017, and its prospects have worsened due to ongoing Brexit negotiations where it has been unable to conclude a trade agreement with the European Union, according to Moody’s.
British Prime Minister Boris Johnson said on Friday that the country should focus on preparing for a no-deal scenario unless the European Union was prepared for “a fundamental change of approach.”
“Growth has been meaningfully weaker than expected and is likely to remain so in the future,” Moody’s said of Britain’s economy.
Britain formally left the E.U. on Jan. 31 following a referendum in 2016.
The coronavirus pandemic meanwhile has already increased Britain’s debt and is also likely to have further negative effects.
“We estimate a sharper peak-to-trough contraction for the U.K. than for any other G20 economy,” Moody’s said, citing the greater severity of the coronavirus outbreak, the reliance of the British economy on services and the continued risk of further coronavirus outbreaks.
Moody’s move comes as more than half of the country is already living under heightened coronavirus restrictions.
Moody’s also said Britain’s state institutions and leadership have been weakened in recent years.
Currently ranked at the fourth highest credit rating from Moody’s, Britain is still in the safe investment zone.
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