Fitch has become the second rating agency to put the UK’s AAA rating on “negative outlook”.
The rating agency says the negative outlook means there is greater than 50 per cent chance of a downgrade over the next two years and that the Government has to address the level of public debt.
Fitch said that although UK is committed to reducing the budget deficit and has a diverse and flexible economy it had “very limited fiscal space to absorb further adverse economic shocks”.
Fitch said: “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 per cent chance of a downgrade over a two-year horizon.”
Moody’s downgraded its outlook on the UK’s AAA credit rating last month, citing the euro crisis and the credit squeeze on the banking sector.