In a bitter blow for George Osborne in the week of his Budget, another credit rating agency has signalled that it is likely to strip the UK of its AAA credit rating next month.
Fitch tonight said that it was placing Britain’s top notch rating on negative watch, citing concerns about the deterioration of the public finances revealed this week. The agency said it would complete its review of the UK’s sovereign rating by the end of April, but warned of a “heightened probability” of a downgrade.
A rival agency, Moody’s, stripped the UK of its AAA status last month, in a humiliation for George Osborne who had pledged to safeguard the gold-plated rating when he took office in 2010. The third of the three big agencies, Standard & Poor’s, also has Britain on negative watch and is expected to reach its own verdict on the UK’s creditworthiness shortly.
Fitch’s statement sent the value of sterling down sharply against the dollar in trading last night.
In its statement, Fitch noted that the UK’s gross national debt is now projected to breach 100 per cent of GDP in 2015-16. It also highlighted the “persistently weak performance of UK growth” in recent years. The Government’s independent economic forecaster, the Office for Budget Responsibility, halved its growth forecast for 2013 this week from the 1.2 per cent it expected in December to just 0.6 per cent. It also said that the national debt would not peak until 2016-17, two years later than Mr Osborne said when he took office. The economy contracted by 0.3 per cent in the final three months of 2012 and economists fear that the UK could be on the verge of an unprecedented triple dip recession.
In response to the Fitch announcement, a Treasury spokesperson said: “This serves to underline that there are no easy answers to problems built up over many years. But we are, slowly but surely, fixing our country's economic problems”