Credit rating agency Moody's has said the UK's top AAA rating is not at immediate risk as the British government steps up its drive to rebuild the country's public finances.
Moody's said it believed Britain's economy was strong enough to withstand imminent swingeing public sector spending cuts and hang on to its top rating.
But the group warned that the UK was still vulnerable to further economic and stock market shocks which could threaten the AAA rating, which it has so far maintained since the 1970s.
The agency's annual credit report on the UK said the recovery still faced major challenges as the banking sector is yet to return to normal following the financial crisis, and as export customers, such as those in Europe, struggle.
Kenneth Orchard, lead analyst for Moody's, said Britain's economy appeared 'sufficiently flexible and robust' to grow at a moderate pace, despite these challenges and tough austerity measures.
UK leanding still weak, figures show
New figures show that lending to UK businesses fell for the fifth month running in July, while mortgage approvals dropped to their lowest level in more than a year.
Separately, the Bank of England said M4, a measure of money supply, fell by 0.2% in August, leaving it up 1.8% on the year - the weakest annual growth rate since monthly records began in July 1983.
The BoE's Trends in Lending report showed the net monthly flow of lending contracted by £2.5 billion in July, following a £3.2 billion decline in June. Net lending to UK businesses was down 5.7% on the year, compared with a fall of 7.9% in June and the smallest fall since August 2009.
Despite the easing in the rate of decline, policymakers are likely to remain concerned about the lack of credit flow, even though interest rates are being held at a record low of 0.5% and £200 billion has been pumped into the economy, partly to revive subdued lending.
'While credit conditions were easing for larger businesses, they remained tight for smaller firms. Most major UK lenders reported that demand for credit remained subdued,' the report said.
Approvals for home purchase loans made by Britain's six biggest lenders - Santander, Barclays, HSBC, Lloyds, Nationwide and RBS - fell to 45,000 in August from 47,000 in July, the lowest since April 2009.
The figures are in line with other indicators suggesting that the housing market recovery has peaked and, in light of recent surveys showing house prices are now falling, may point to further declines ahead.
