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UK’s last AAA rating at risk of downgrade

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S&P has warned the UK’s AAA rating is at risk of downgrade as it cuts its view on the nation from stable to negative.

The ratings agency warned that the referendum on EU membership and a potential Brexit has made it more negative on the nation.

We believe that the UK government’s decision to hold a referendum on EU membership by 2017 indicates that economic policymaking could be at risk of being more exposed to party politics than we had previously anticipated, similar to the situation in the US when we lowered that sovereign rating in 2011,” says S&P.

The ratings house warned there is a one in three chance of a downgrade in the next two years, with the UK leaving the EU raising concerns about how it will finance debt and budget deficits.

”In our opinion, the process of holding a referendum on the UK’s membership of the EU is evidence of increasing risks to the effectiveness, stability and predictability of the UK’s policymaking. This in turn could negatively affect sustainable public finances, balanced economic growth, and the response to economic or political shocks.”

S&P is not alone on its negative outlook amid an EU referendum, with Moody’s warning last week that an early EU referendum is potentially hazardous for the UK.

It warned that a referendum brought forward to 2016 reduces the time available for negotiations with the EU on “the reforms and repatriation of powers sought by the UK Government”.

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