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S&P stands by UK ‘AAA’ rating

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Standard & Poor’s has said the UK will keep its AAA rating despite the economy slipping into a double-dip recession.

The credit ratings agency reaffirmed the UK’s top rating as stable, adding that it expected the government to stick to its tight budget and for the economy to pick up in the second half of 2012.

S&P said in a statement that “monetary flexibility remains a key credit strength owing to British sterling’s role as a global reserve currency.”

“The stable outlook reflects our expectation that the UK government will implement the bulk of its fiscal consolidation programme and that the economy should recover in the remainder of 2012 and strengthen thereafter,” S&P added.

The news comes despite last week’s figures from the Office for National Statistics which showed the UK economy contracted by 0.7 per cent in the second quarter of 2012. The figures marked a third consecutive quarter of contraction for the UK economy.

However, S&P added the AAA rating could come under pressure should the government fail to put into practice its fiscal consolidation plan.

“We could lower the ratings if the pace and extent of fiscal consolidation slows beyond what we currently expect,” the ratings agency added.

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