Worrying News for Osborne from Moodys and Fitch
Whilst the media seem focussed on the welcome news of WPP’s return to the UK, the credit ratings agency Moodys has this morning fired a warning shot across Osborne’s bows.
Reacting to the news that growth has been revised down and debt revised up the agency has stated that:
we believe that slower growth combined with weaker-than-expected fiscal consolidation could cause the UK’s debt metrics to deteriorate to a point that would be inconsistent with a AAA rating
No imminent chance of a downgrade yet but certainly worrying news. Moodys’ own forecast for UK GDP growth in 2011 is 1.6%, marginally below that of the OBR.
David Riley, head of sovereign ratings at Fitch, said yesterday’s Budget measures were fiscally neutral, after chancellor George Osborne re-affirmed the government’s previous deficit reduction plans.
He said: “If the economic recovery proves weaker than projected, future Budgets may require additional measures to ensure that the government meets it ambitious fiscal targets.”
Back in May 2009, when S&P (the third major agency) warned that Britain could potentially lose its AAA rating Osborne commented that is was “now clear that Britain’s economic reputation is on the line”.
It looks like our reputation is ‘on the line’ again.