S&P reaffirms UK’S triple-A rating
Britain’s prized triple-A sovereign debt rating could come under pressure if the government strays from its path of public deficit cuts in the face of weaker growth, credit agency Standard & Poor’s said.
In a release that coincided with a keynote speech by finance minister George Osborne at his Conservative Party’s annual conference, S&P said British growth was likely to be slower than the government expected.
It reaffirmed its AAA rating and said the outlook was stable, but warned tax revenues could come under pressure as fiscal austerity weighed on the economy, though easy monetary policy should provide some support.
“The ratings could come under downward pressure if, against our expectations — and perhaps in response to weakening growth prospects — the coalition government’s commitment to fiscal consolidation falters,” it said in a statement.
Britain’s economy has been virtually stagnant for almost a year, leading many experts to downgrade their growth forecasts for 2011 and 2012 and putting pressure on the government to come up with a plan to boost the recovery.
The Conservative/Liberal Democrat coalition has insisted it will stick to plans to virtually eliminate a budget deficit of around 10 percent of GDP by 2015, warning that easing the pace of consolidation risks hitting market confidence in Britain.
Yields on British government debt have fallen to record lows in recent months as ongoing worries about the euro zone debt crisis have driven investors to seek safer assets.
S&P noted that demand for British gilts was strong and that the long average maturity of its debt should help keep Britain’s borrowing needs low compared with its peers.