Monday 26 September 2016

New Brexit blow as Fitch downgrades Britain's credit rating

Published 28/06/2016 | 10:41

US President Barack Obama said he does not believe the Brexit will bring 'major, cataclysmic' changes (AP)
US President Barack Obama said he does not believe the Brexit will bring 'major, cataclysmic' changes (AP)

International ratings agency Fitch has downgraded Britain's credit rating by one notch following the vote to leave the European Union.

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The move to AA from AA+ follows the decision earlier on Monday by Standard and Poor's to drop the country's sovereign rating by two notches to AA from AAA.

"Fitch believes that uncertainty following the referendum outcome will induce an abrupt slowdown in short-term GDP growth, as businesses defer investment and consider changes to the legal and regulatory environment," the agency said in a statement.

"Medium-term growth will also likely be weaker due to less favourable terms for exports to the EU, lower immigration and a reduction in foreign direct investment. An adjustment in the value of sterling and changes in the business environment could also affect growth."

Meanwhile Lithuania's foreign minister said the UK must clarify whether its decision to leave the EU was "clear and final".

Speaking at the United Nations in New York, Linas Linkevicius said the current uncertainty was not only detrimental to financial markets, but to millions of Europeans.

He said that if the decision was final, UK-EU talks should start without any artificial delays.

He said the UK could stay in the single market like Norway, which pays large fees to the EU budget, it could follow Switzerland which has about 100 agreements with the EU in different fields, or it could negotiate a free trade treaty with the EU.

"Whatever outcome, damage will be huge," Mr Linkevicius said.

Businesses in Britain already are seeing the impact of the seismic vote to have the country leave the other 27 nations in the trading bloc and strike out on its own.

Companies large and small are feeling the shockwave which left the country in uncharted waters, unclear of what the future will hold.

Being part of the EU guarantees no tariffs on trade on goods and services and the free movement of workers, without the hassle of visas or work permits.

Now that it is leaving, Britain will have to first negotiate its exit, which could take years, and then renegotiate new relations with Europe, which could take even longer.

The Institute of Directors said a survey of its 1,000 members showed that three out of four believe Britain's exit from the EU will be bad for business. About a quarter said they would freeze recruitment and 5% said they would cut jobs.

AP

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