UK's austerity drive gets Moody's backing
One of the world's premier rating agencies has backed the UK's economy by maintaining its top credit rating.
"Despite a weak post-crisis balance sheet and challenging economic outlook, the UK is able to meet these challenges whilst maintaining its Aaa credit rating," Moody's Investors Service said. It added that the UK also retained a stable outlook.
Kenneth Orchard, Moody's lead analyst for the UK, spelled out the problems facing the country's economy, saying: "The global financial crisis of 2008 to 2009 caused serious long-term damage to the British government's balance sheet. The country's economic outlook is also more challenging because private sector de-leveraging, the uncertain state of the financial sector and slower growth in the UK's main trading partners are not conducive to allowing GDP growth to return to its pre-crisis trend rate."
Yet, the agency said it had handed the UK a stable rating following the government's commitment to "stabilise and eventually reverse the deterioration in its financial strength. Government debt is also well structured, thus limiting re-financing risk."
This will come as a relief to the Government which is to unveil its spending review next month.
Hetal Mehta, UK economist for Daiwa Capital Markets, said: "Moody's has given the green light to the UK government in terms of its fiscal policy. They are confident that that the Government is tackling the issues."
Moody's first assigned an Aaa rating to the UK government's long-term debt in 1978, and the rating has remained unchanged since then.
A credit rating is essentially an indication as to how risky the agency thinks a debt issuer is. The higher the rating, the less likely it believes the issuer is to default. This rating allows the UK to borrow at the cheapest rates.