UK Loses AAA Credit Rating

The UK has lost its top AAA credit rating for the first time since 1978.

The downgrade was made my ratings agency Moody's, who are the first to cut the UK's rating. Its rating is now Aa1.

It said economic growth is expected to "remain sluggish over the next few years", while certain challenges lie ahead with regards to the government's debt reduction programme.

Commenting on the downgrade, Chancellor George Osborne described it as "a stark reminder of the debt problems facing our country".

He added: "Far from weakening our resolve to deliver our economic recovery plan, this decision redoubles it. We will go on delivering the plan that has cut the deficit by a quarter."

Shadow chancellor Ed Balls said that the move is a "humiliating blow to a prime minister and chancellor who said keeping our AAA rating was the test of their economic and political credibility."

The UK has maintained a top AAA credit rating since 1978 from both Moody's and S&P. Explaining its decision to downgrade the rating, Moody's said it was due to the "challenges that subdued medium-term growth prospects pose to the government's fiscal consolidation programme, which will now extend well into the next parliament."

It added: "The main driver underpinning Moody's decision to downgrade the UK's government bond rating to AA1 is the increasing clarity that, despite considerable structural economic strengths, the UK's economic growth will remain sluggish over the next few years due to the anticipated slow growth of the global economy and the drag on the UK economy."

The agency said that the UK's debts are unlikely to be reversed until 2016, but said that the country's outlook remains "stable", and no additional downgrades are expected in the near future.

(JP/CD)