Ratings agencies have warned that the outcome of the UK election is credit negative as the future government's attitudes towards the Brexit and public debt remain unclear.
Moody's said today that the reduction in Prime Minister Theresa May's majority was "credit negative" because it will impede Brexit talks and heighten the financial risks faced by the country.
Meanwhile, S&P's chief economist for Europe, the Middle East and Africa, Jean-Michel Six, said that "for the time being, the outlook remains negative" for the UK, the BBC reported.
The government's approach to some of its most important policy areas is uncertain following the election last week. Today, Brexit secretary David Davis made it clear that some Conservative policies will be scrapped, but did not outline which ones will go.
"In our view, the budget deficit will increase this year and next as the government reacts to the economic slowdown under way," said Kathrin Muehlbronner, Moody's senior vice president.
"The election outcome, with significant gains for the Labour party which had campaigned for increased public spending, will likely be seen as a 'vote against austerity'. The public debt ratio will rise further and for longer than we had expected."
Muehlbronner also pointed out, however, that the chances of the UK remaining in the EU single market have increased. Several City voices are hoping for a softer Brexit given May's diminished stature.