Moody's downgrades British government bond rating

Updated: Friday, 22 Feb 2013 23:11

Credit ratings agency Moody's Investors Service downgraded Britain's government bond rating one notch from the top AAA to AA1, saying sluggish growth and rising debt were weakening the country's medium-term outlook.

British chancellor George Osborne said the blow only redoubled his resolve "to deliver our economic recovery plan," based on deep spending cuts.

Moody's said "subdued" growth prospects and a "high and rising debt burden" were weighing on the British economy.

The agency said rising debt meant "a deterioration in the shock-absorption capacity of the government’s balance sheet, which is unlikely to reverse before 2016."

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It said, though, that "the UK's creditworthiness remains extremely high," and its outlook was stable.

Moody's said that "a combination of political will and medium-term fundamental underlying economic strengths will, in time, allow the government to implement its fiscal consolidation plan and reverse the UK's debt trajectory."

The Conservative-led government is cutting £50bn in spending through 2015 in a bid to slash the national debt, which stands at more than £1 trillion, over 70% of GDP.

Moody's said it expected that level to peak at just over 96% of GDP in 2016.

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