Fitch Lowers Outlook on U.K.'s Triple-A Rating

NEW YORK ( TheStreet) -- Fitch Ratings gave voice to some nervousness about the United Kingdom's Triple-A status on Wednesday, lowering its outlook on the country's long-term debt rating to negative from stable.

It's not so much the United Kingdom itself, which the ratings agency said has a "high-income, diversified and flexible economy as well as political and social stability," but rather its exposure to instability in other parts of Europe as well as a mounting debt load.

"The revision of the rating Outlook to Negative from Stable reflects the very limited fiscal space to absorb further adverse economic shocks in light of such elevated debt levels and a potentially weaker than currently forecast economic recovery," Fitch said in a press release.

The firm continued: "In light of the considerable uncertainty around the economic and fiscal outlook, including the risks posed to economic recovery by ongoing financial tensions in the eurozone and against the backdrop of a still large structural budget deficit and high and rising government debt, the Negative Outlook indicates a slightly greater than 50% chance of a downgrade over a two-year horizon."

Fitch went ahead and affirmed the Triple-A rating for the U.K. on Wednesday, but noted that the country's "structural budget deficit is second in size only to the US ('AAA'/Negative) and indebtedness is significantly above the 'AAA' median, although currently broadly in line with France ('AAA'/Negative) and Germany ('AAA'/Stable)."

The ratings agency believes the U.K. has a solid plan in place to reduce its debt but said the country doesn't have much margin for error as "the projected peak for government indebtedness is at the limit of the level consistent with the UK retaining its 'AAA' status."

"With debt not expected to peak until 2014-15, three fiscal years from now, the risks and uncertainty surrounding the realisation of debt reduction by the middle of the decade are material," Fitch wrote.

-- Written by Michael Baron in New York.

>To contact the writer of this article, click here: Michael Baron.
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