S&P, Fitch slash UK’s credit rating post Brexit

The Dollar Business Bureau

The UK suffered another setback to its economic standing as its sovereign credit score has been downgraded by two top ratings agencies, who have said that last week's referendum to leave the EU would hurt the country’s economy.

Standard & Poor's (S&P) stripped the UK of its top-notch rating, downgrading it by two notches from AAA to AA and also warned that the ratings could be slashed further. The rating agency also said the result of the referendum vote could lead to a decline in the economic performance of UK, including the country’s huge financial services sector.

Another international credit rating agency, Fitch Ratings, also dropped its credit ranking for the UK by one grade, and said further cuts may follow. With intense pressure on the UK’s standing in international markets, Fitch slashed its credit rating to AA from AA+.

Fitch cut its growth forecast for UK’s economy to more than half in 2017 and 2018 to only 0.9 percent for both the years, from 2 percent earlier. The ratings agencies’ rating downgrade reflected the market's view on the Brexit vote, as sterling dropped to a 31-year low against the US dollar on Monday and stock exchanges fell for a second trading day since the vote on June 23. This is the first time that S&P had cut an AAA sovereign credit rating by two grades in a single move.

"In our view, this (Brexit vote) result is an important event, and will lead to a less stable, predictable, and effective policy structure in the UK," said S&P, in a statement.

The additional prospects of a new referendum for independence in Scotland, which voted hugely to remain in the EU, threatened the economic and constitutional integrity of UK, S&P cautioned. S&P also warned that financial companies, especially international ones, might look for other investment destinations after the country leaves the EU.