UK faces Fitch downgrade over debt levels
BRITAIN'S credit rating faces another downgrade in the next month after Fitch warned it is reviewing the country's "AAA" status in the wake of the Budget.
The agency warned that there is a "heightened probability of a downgrade" as it conducts a review of the rating by the end of April.
Fitch said its decision to put the UK on a "negative watch" was because Britain's debt will now be bigger than Chancellor George Osborne first forecast and is taking longer to bring under control.
The pound fell sharply after the news before recovering slightly. Graph: Bloomberg
Mr Osborne announced on Wednesday that the independent Office for Budget Responsibilty had halved its annual growth forecasts for this year to 0.6pc, blaming the “weaker outlook for consumer spending, business investment and exports”.
The OBR also said government debt and public sector net debt were forecast to peak in 2016-17 at 100.8pc and 85.6pc of GDP and only begin to decline in 2017-18.
Fitch said in a statement: "The Rating Watch Negative reflect the latest economic and fiscal forecasts published by the OBR that indicate that UK government debt will peak later and at a higher level than previously expected.
"Fitch has previously stated that General Government Gross Debt failing to stabilise below 100pc of GDP and on a firm downward path towards 90pc over the medium term would likely result in a downgrade of the UK's sovereign ratings."
A downgrade from Fitch would leave Standard & Poor's as the only one of the three major agencies with a top rating on the UK.
Last month, Moody's cut Britain's rating from AAA to Aa1 on fears that the sluggish economic recovery will make it harder for the government to repair the public finances.
A Treasury spokesman said: "This serves to underline that there are no easy answers to problems built up over many years. But we are, slowly but surely, fixing our country's economic problems.
"As the [Chancellor] said at the Budget: it's taking longer than anyone hoped, but we're on the right track," he said in a statement after Fitch's announcement."
The pound slid to $1.5189 from $1.5241 after the news, before rebounding to last trade at $1.5212, still up 0.3oc on the day.
- Andrew Trotman, Telegraph.co.uk