S&P Downgrades UK AAA Credit Rating Post Brexit Vote
Posted: Monday, June 27, 2016 – 12:02 PM
(AFP) Ratings agency Standard & Poor’s removed the United Kingdom’s coveted AAA status on Monday because of its vote to leave the European Union, downgrading it by two notches with a long-term negative outlook.
“In our opinion, this outcome is a seminal event, and will lead to a less predictable, stable, and effective policy framework in the UK,” a statement from the agency read.
The negative outlook reflects the risk to the economy, and the future of sterling as a reserve currency, it added.
“The Brexit result could lead to a deterioration of the UK’s economic performance, including its large financial services sector, which is a major contributor to employment,” it said.
The agency also noted risks to Britain’s “constitutional and economic integrity” due to the possibility of a future referendum on Scottish independence.
Divisions within the ruling Conservative party and a lack of clarity of Britain’s future trade relationship with the EU increase the risks, according to the analysis.
Britain voted by 52 percent in favour of leaving the EU last week in a result that has hit European markets and sent the British pound tumbling to a three-decade low against the dollar.
Following the vote, fellow ratings agency Moody’s cut Britain’s credit rating outlook to “negative” but kept its overall rating at a high “Aa1”.
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