The agency said that following the Brexit vote, it judged the UK to have a “less predictable, stable, and effective policy framework”. Consequently, it had downgraded the UK by two notches to ‘AA’.
It also stated that the downgrade reflected the risks of a marked deterioration of external financing conditions following an exit, as well as poorer economic prospects and a possible fiscal impact.
“The downgrade reflects our view that the leave result in the UK’s referendum on the country’s EU membership will weaken the predictability, stability, and effectiveness of policymaking in the UK and affect its economy, GDP growth, and fiscal and external balances,” the firm’s statement said. “We have revised our view of the UK's institutional assessment and we no longer consider it to be a strength in our assessment of the UK's key rating factors.”
In the review, S&P stated that the deterioration of the UK's economic performance, including in financial services, was likely to hit both employment and tax receipts. This was in turn likely to affect investment and economic growth, as well as the public finances.
Uncertainty surrounding the nature of the UK’s relationship with the EU will also pose risks, the review stated.
Also following the Brexit vote, rival agency Fitch, who initially downgraded the UK from triple-A in 2013, lowered its rating from its second highest AA+ to AA, forecasting an "abrupt slowdown" in both short term and medium term growth “due to less favourable terms for exports to the EU, lower immigration and a reduction in foreign direct investment”.
The final of the three main ratings agencies, Moody’s has not downgraded the UK from its second highest Aa1 rating, which it also last changed in 2013, but has put the country on a negative outlook.
In a report published today, the think-tank IPPR North said boosting the economy of the north of England would be even more important after a Brexit vote. Whatever the outcome of the negotiations to leave the EU, trade with the continent will remain important, and with over half of all international trade destined for the EU, the
The north of England cannot afford any significant disruption to these vital trading relationships, the report stated.
IPPR North director Ed Cox said that Britain was a trading nation long before the EU was ever thought of, and this would not change despite the Brexit vote.
"To continue to punch above their weight, we need to see government investment to back that of the ports,” he said, as the group published a strategy for the Northern ports. “With over £1bn invested in the ports themselves, government must now put in its £100m to create an East-West freight ‘supercorridor’ and end the costly and inefficient movement of lorries up and down the country.”
