Treasury hits back at Moody’s downgrade of UK’s credit rating

25 Sep 17

The Treasury has hit back at major credit ratings agency Moody’s decision to downgrade the UK’s credit rating.

Moody’s brought the UK’s credit rating down from an Aa1 rating to an Aa2 rating over the weekend amid fears its public finances were not going to do well as a result of Brexit.

Kathrin Muehlbronner, an analyst with the rating agency, said: “Moody’s expects weaker public finances going forward, partly linked to the economic slowdown under way but also reflecting the increasing political and social pressures to raise spending after seven years of spending cuts.”

The downgrade came after Theresa May delivered her speech in Florence outlining her optimistic vision for UK’s relationship with the EU post-Brexit.

A spokesperson for Treasury hit out at the rating’s agency for the timing.

He said: “The prime minister has just set out an ambitious vision for the UK’s future relationship with the EU, making clear that both sides will benefit from a new and unique partnership.”

“We have made substantial progress in reducing the deficit while finding extra money for the NHS and social care at the same time."

He added: "We are not complacent about the challenges ahead, but we are optimistic about our bright future.” 

Peter Dowd, Labour’s shadow chief secretary to the Treasury, labelled the downgrade of the UK’s credit rating as a “hammer blow” to the economic credibility of the Conservatives and chancellor Philip Hammond. Hammond has previously claimed it was “critical” for the UK to maintain the highest credit ratings.

Dowd added: “For the second time under the Tories the UK’s credit rating has been downgraded, and on this occasion citing their lack of faith in the chancellor to meet his own spending targets as a result of unfunded spending commitments, such as the deal with the DUP.”

The UK lost its AAA credit rating from all the major credit rating agencies in June last year after the Brexit vote.

Vince Cable, leader of the Liberal Democrats, said the move by Moody’s was a warning that the UK’s economy would be weaker once the proposed two-year transitional phase comes to an end.

He said: “All May has done is simply delay the economic pain caused by an extreme Brexit.”

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