Fitch says UK’s AAA rating safe due to spending cuts

BRITAIN’S top-notch credit rating looks increasingly secure thanks to the government’s spending cuts and a recovering banking sector, ratings agency Fitch said yesterday, in a significant boost for the chancellor.

However, Fitch said there was a risk that inflationary pressures could spur a sharper-than-expected rise in interest rates which might hurt the economy.

“The strong budgetary consolidation effort and declining fiscal risks arising from the UK financial sector support the stable outlook on the UK’s ‘AAA’ ratings,” said Maria Malas-Mroueh, a director in Fitch’s Sovereign team.

Fitch said the government’s deficit reduction plan was credible and it expected the 23 March budget to reaffirm the government’s commitment to fiscal tightening.

The opinion of the ratings agency will provide a welcome fillip for George Osborne, who is fighting claims from Labour that he is cutting too far and too fast.

However, Fitch noted that uncertainty over how much spare capacity remained in the economy as well as the pace of economic recovery had increased the potential for monetary and fiscal policy errors.