Moody's warns on UK rating

2011-06-08 11:24

London - The outlook for Britain's prized triple-A credit rating remains stable but weaker growth and slippage in the government's fiscal plans could lead to a reassessment, credit ratings agency Moody's said on Wednesday.

The government aims to virtually eliminate a budget deficit of around 10% of gross domestic product (GDP) over the next four years, but lacklustre growth has caused some people to doubt whether it will meet this target. "Moody's has the UK at a triple-A rating with a stable outlook," a Moody's spokesperson told Reuters.

"However, as we've been saying for a while, in a situation of lower growth combined with weaker than expected fiscal consolidation we would reconsider our stance," he said.

Investors took fright earlier after news agency Market News International quoted a Moody's analyst as raising doubts over the outlook for the UK's triple-A rating, causing September gilt futures to plunge by almost half a point.

However, the contract subsequently recovered from most of its losses. Analysts said the report stated nothing new and served merely as a reminder of some of the risks ahead.

"I'm not sure there's much new information in there," said Andy Chaytor, strategist at RBS.

"But it does remind the market that the UK might have a good path, but you can't altogether ignore the vulnerability of that path."