S&P affirms Britain's top credit rating, outlook negative

12th July 2010, Comments 0 comments

Ratings agency Standard & Poor's on Monday maintained Britain's top AAA credit rating with a negative outlook, citing uncertainties over the government's ability to slash the deficit.

"We are affirming our 'AAA' long-term rating on the United Kingdom reflecting our view of the UK's resources, as evidenced by its wealthy and diversified economy, ample fiscal and monetary policy flexibility, and adaptable product and labor markets," S&P said in a statement.

"However, in our view, a number of large and politically challenging spending decisions are still to be made, and S&P's medium-term economic forecasts for the UK are less optimistic than the assumptions underlying the budget.

"We therefore believe there is still a material risk that the UK's net general government debt burden may approach a level incompatible with the 'AAA' rating.

"As a consequence, we have maintained the negative outlook on the long-term rating on the UK."

At the same time, S&P praised the government for its "strong" efforts to curb spending that were contained in an emergency budget presented on June 22.

Britain's new coalition government last month delivered a deficit-slashing emergency budget that contained higher taxation and spending cuts designed to narrow the nation's enormous public deficit.

"The coalition government has set out what we view as a strong framework for fiscal consolidation in its June 2010 budget," S&P added on Monday.

The Conservative-Liberal Democrat administration, which rose to power at a general election in May, had inherited a record deficit from the previous Labour government.

© 2010 AFP

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