UK rating may be downgraded

London - Britain's credit rating could be lowered if the new government fails to come up with convincing plans to cut public debt after elections this year, ratings agency Standard & Poor's said on Monday.

The agency affirmed Britain's top-grade AAA rating but said the country remained on "negative outlook," meaning its creditworthiness could be revised downwards - a move that would cause a major shockwave in the global economy.

"The outlook on the United Kingdom remains negative based on our view that... the UK's net general government debt burden may approach a level incompatible with a 'AAA' rating," the ratings agency said in a statement.

"We expect to review the long-term rating and outlook again once medium-term fiscal policy becomes clearer following the 2010 parliamentary elections," the statement said, referring to the general election expected on May 6.

"The rating could be lowered it we conclude that the incoming government's fiscal strategy is unlikely to put the UK debt burden on a secure downward trajectory over the medium term," it added.

S&P forecast that general government debt will rise to 77% of gross domestic product (GDP) in 2010 and approach 100% by 2014 - far higher than official forecasts - because of weak growth and a huge deficit.

The government forecasts debt to peak at 89.2% of GDP in 2013-2014.

The ratings agency also said that the budget announced last week did not make any clearer how the government planned to deal with the debt in the medium-term, adding that there was "substantial uncertainty" over policy.

- AFP