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Hung Parliament doesn’t put AAA status at risk, say ratings agencies

Moody’s and S&P say hung Parliament will not put the AAA status of the UK at risk.

Last week, Moody’s calmed fears of a hung Parliament, and now that result has come to fruition, it has once again said that it is the economic policy that comes from the Government, not the Government itself that counts.

Moody’s senior vice president in the sovereign risk group and lead analyst for the UK’s sovereign rating Arnaud Mares says: “The lack of a one-party majority will undoubtedly create political uncertainty in the short and perhaps also the medium to longer term. Nevertheless, Moody’s view is that it is not the political but the policy outlook that matters most.”

Mares says that the differences between the three parties’ fiscal plans are “rather minor”, so should not prevent compromise in the coming weeks.

He says: “Cross-party support for consolidation will now be tested in a new Budget, probably by the end of June, and the level of political consensus it commands.”

S&P has also calmed any immediate fears in the wake of the hung Parliament election. It says: “The complexion of the new Government is not, in itself, a rating factor for us. Instead, our focus is on whether the Government’s fiscal consolidation plan to be unveiled in due course is likely or not, in our view, to put the UK Government debt burden on a secure downward trajectory over the medium term.”

It says it will continue to view the UK’s ratings on a negative rate outlook, which was assigned last year, and says it plans to reassess the AAA sovereign status at the end of the year, once the next Budget is announced.

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