S&P keeps UK on triple-A rating, says expects no Brexit

29th April 2016, Comments 0 comments

Britain kept its coveted top-grade triple-A credit rating from Standard and Poor's on Friday, with the agency saying it expected the country to ultimately vote to remain in the European Union.

Standard and Poor's said "our affirmation of the rating reflects our assumption that, by a small majority, the referendum will deliver a vote to remain in the EU", citing polls which show a slim majority planning to vote on June 23 to stay in the EU.

However the ratings agency kept the top-grade rating, which generally allows a nation to borrow at lower rates, on negative outlook over the possibility voters would choose to leave the bloc, or "Brexit".

Standard and Poor's said "...that a vote to leave would deter investment in the economy, decrease official demand for sterling reserves, and put the U.K.'s financial services sector at a competitive disadvantage compared with other global financial centers."

It added Brexit could also dampen economic growth and curtail investment which has been critical in covering Britain's current account deficit, a key measure of whether a country is paying its way in the world.

The deficit was over 5 percent last year.

"Depending on the circumstances and consequences of a vote to leave, we could lower the rating by more than one notch if we reassessed our view of the UK's institutional strength and ability to formulate policy conducive to sustainable growth," said the ratings agency.

But uncertainty around Brexit, combined with the weaker global outlook overall, already led Standard and Poor's to lower its growth forecasts for Britain.

Assuming that Britain doesn't leave the EU, the ratings agency said it now expects the British economy to grow by a still-robust 2.1 percent per year in the 2016-2019 period.

The other two leading global credit ratings agencies, Moody's and Fitch, both stripped Britain of its top rating in 2013.

© 2016 AFP

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