Moody's says it would downgrade the UK's credit rating again if it lost access to the Single Market in a Brexit deal.
The ratings agency revealed this morning that if the UK were to get a poor Brexit deal, which would "materially weaken medium-term growth and the credibility of UK fiscal policy [would be] undermined".
"We would downgrade the UK's sovereign rating if the outcome of the negotiations with the EU was a loss of access to the Single Market as this would materially damage its medium-term growth prospects", said Kathrin Muehlbronner, a Moody's Senior Vice President and the report's co-author.
"A second trigger for a downgrade would be if we were to conclude that the credibility of the UK's fiscal policy had been tarnished as a result of Brexit or other reasons."
The ratings agency expects that the Autumn Statement, due on 23 November, will likely give "significantly more clarity" in this area.
It said that it expects a "series of accords offering access to the EU market for goods and more constrained access for services, in particular financial services," and stressed that the scale of the impact of Brexit would depend on the deal.
Moody's says that the loss of passporting rights would be "manageable" but would lead to higher costs as companies would be forced to restructure.
For UK banks, the loss of passporting rights that operate across jurisdictions would be credit negative but manageable. The greatest impact would be felt through higher costs and increased inefficiency as the companies restructure, leading to reduced profitability for some time.
Interestingly, the agency said it did not expect to have "any clarity on the UK's objectives, or on its chances of achieving them... until the negotiations are underway". This reflects Theresa May's repeated comments that there will be "no running commentary" on the Brexit negotiations. She has said she will trigger Article 50 and kick off talks next March.
It also added: "In Moody's view, there is little likelihood that the UK will not exit the EU." Sorry, Tim Farron.
In September Moody's stressed the importance of single market access and passporting rights for the City of London.
Ministers have said they will fight for "the closest possible access" to the single market in any Brexit deal, and Philip Hammond has made repeated assurances that the government will prioritise the financial services sector.
Read more: Moody's slashes outlook for eight UK banks to negative after Brexit
Moody's currently rates the UK as Aa1, the second-highest rating. It already downgraded the score on June 24, the day of the referendum result, saying it would herald a "prolonged period of uncertainty in the UK, with negative implications for... medium-term growth."