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."

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.