Tue, 14 Jul 2020

Uncertainty over Brexit makes Moody's nervous

Lola Evans
10 Nov 2019, 05:19 GMT+10

LONDON, UK - Moody's outlook on its UK Aa2 rating has been changed from stable to negative on weakness in the economy and risks, all attributed to Brexit, and the British government's handling of it.

The ratings agency cites weakening institutional strength, risks of rising debt and shrinking growth as factors behind the change.

"The UK government's institutional strength has weakened, as illustrated by the increasing inertia and, at times, paralysis that has characterized Brexit-era policy-making," Moody's said Friday.

"The UK's debt burden is high and unlikely to fall, given growing pressures for spending increases, with little clarity on how they might be financed."

"Brexit-related uncertainty has led to slower growth in business investment, which weighs on growth rates," Moody's said.

While the Bank of England has not weighed in on the country's credit rating, its assessment of economic conditions differs little to that of Moody's. In its November Monetary Policy Report, the bank agrees growth in the UK has slowed. It also points out growth around the globe has also slowed. The central bank concedes inflation is a little below its 2% target, that Brexit uncertainty and been "high," and if growth stays weak interest rates could fall - and if growth recovers as expected, rates will have to increase.

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