Credit rating agency Moody’s said it expects the UK economy to weaken, and that the UK government is unlikely to get the deal it wants on Brexit
Moody’s last week cut its credit rating for UK government debt, though the Moody’s cut was actually just bringing it into line with the ratings ascribed to the UK by the other agencies. Moody’s now rates the UK government’s finances at Aa2, which is the lowest the rating has ever been from that agency.
The agency said “uncertainty” around the outcome of the EU negotiations was central to its decision to cut the credit rating.
Colin Ellis, UK managing director at Moody’s, said: “We continue to think that the UK government’s objective of reaching a comprehensive Free Trade Agreement (FTA) with the EU that covers both goods and services is unlikely to be met.
"Our base case remains that the two sides will eventually come to an agreement that mimics many – but not all – of current trade arrangements, particularly those focusing on goods, and this agreement will only come into force after an initial transition period.”
He said such a scenario would have a negative effect on the UK economy, with business activity disrupted, causing a slowdown in growth.
Mr Ellis said he has maintained the existing credit rating on UK bank and insurance company debt, as in his view, the financial sector will see only minimal disruption as a result of the UK exiting the EU.
The fund manager Neil Woodford believes the outlook for the UK economy is better than the consensus are expecting because the banking system has, a decade after the financial crisis, been repaired.
This will, said Mr Woodford, mean greater access to credit for businesses and consumers, boosting economic growth.
Brian Dennehy, runs IFA firm Dennehy Weller, said he thinks Brexit will be viewed as a “sideshow” within five years from now.
David.Thorpe@ft.com
