This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Moody's Downgrades U.K. From AAA To AA1

By Jill Lawless

LONDON -- Credit ratings agency Moody's Investors Service downgraded Britain's government bond rating one notch from the top AAA to AA1 Friday, saying sluggish growth and rising debt were weakening the country's medium-term outlook.

Treasury chief George Osborne said the blow only redoubled his resolve "to deliver our economic recovery plan," based on deep spending cuts.

Moody's said "subdued" growth prospects and a "high and rising debt burden" were weighing on the British economy.

The agency said rising debt meant "a deterioration in the shock-absorption capacity of the government's balance sheet, which is unlikely to reverse before 2016."

It said, though, that "the U.K.'s creditworthiness remains extremely high," and its outlook was stable.

Moody's said that "a combination of political will and medium-term fundamental underlying economic strengths will, in time, allow the government to implement its fiscal consolidation plan and reverse the U.K.'s debt trajectory."

For the British government, the move was unwelcome but not unexpected. All three of the big rating agencies -- Moody's, Standard & Poor's and Fitch -- had placed Britain's rating on negative watch, as the economy continues to struggle.

The Conservative-led government is cutting 50 billion pounds ($80 billion) in spending through 2015 in a bid to slash the national debt, which stands at more than 1 trillion pounds, over 70% of GDP.

Moody's said it expected that level to peak at just over 96% of GDP in 2016.

Public sector borrowing remains stubbornly high, and is forecast by the government's Office for Budget Responsibility to be 120 billion pounds for 2013.

Critics say the government's austerity policy has failed to kick-start the economy, which has been through two periods of recession since 2008.

The U.K. emerged from a nine-month recession in the third quarter, when GDP grew by 0.9%. But the economy contracted by a worse-than-expected 0.3% in the last three months of 2012.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,416.85 +225.48 1.31%
S&P 500 2,021.25 +19.09 0.95%
NASDAQ 4,683.4070 +45.4130 0.98%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs