A credit rating agency has warned that Britain needs to put its public finances in order much more quickly as it faces a 'formidable' budgetary challenge.
Fitch said the country needed a faster pace of deficit reduction than set out in April by the previous Labour government.
The agency, looking ahead to the new government's June 22 emergency budget, did not comment directly on the outlook for Britain's top AAA rating but noted that debt had risen very quickly since 2008.
Britain's AAA rating 'is supported by its strong policy institutions, advanced, diversified and flexible economy, exceptional financing flexibility and historical track record of fiscal consolidation'. But it warned that Britain's public debt ratio had risen much more sharply than any other AAA country since 2008.
'The adjustment required to stabilise debt is amongst the highest of advanced countries,' Fitch noted in a statement. Accordingly, the new Conservative-Liberal Democrat coalition government led by David Cameron must tackle the problem quickly, it said.
Britain chalked up a public deficit equal to 11.1% of gross domestic product (GDP) in the fiscal year to March 2010, one of the largest in the EU and way above the EU limit of 3%.
Fitch warned that merely changing the growth forecasts in the April budget to make them more realistic would 'still run the risk of leaving the UK as something of a stand-out relative to the deficit targets of other advanced country sovereigns'.
On Monday, David Cameron said Britain's finances were 'even worse than we thought' and warned of 'painful' and unavoidable cuts. He warned that if urgent action were not taken, the consequences would be much worse as interest payments stacked up.
