Britain warned of economy downgrade

Chancellor George Osborne was issued a pre-Budget warning by an influential credit rating agency last night as it issued a "negative" outlook on the prospects of the UK economy retaining its AAA rating.

Fitch moved the country's rating from stable after deciding its exposure to a fresh eurozone crisis made it more likely than not that it would be stripped of its cherished top rating by 2014.

Treasury Chief Secretary Danny Alexander said the move – which follows a similar downgrade by another of the top agencies last month – was a "salutary reminder" of the need to maintain austerity measures.

"There will be no unfunded giveaways in next week's Budget," Mr Alexander said, insisting the news should act as a "wake-up call" for those urging the Government to ease up on deficit-reduction plans.

"This is a salutary reminder as to why Britain needs to deal with the enormous debts and deficits we inherited, why we have got to stick to those plans. It should be a wake-up call to anyone who thinks we can afford, as a country, to loosen the purse strings. We can't afford to do that."

Fitch said it considered the Government's deficit-reduction plans to be "credible" and on track and that it expected them to be sustained.