Moody's says UK will keep top credit rating if it sticks to plan
THE UK will retain its top credit rating if the government sticks to its deficit reduction plan, ratings agency Moody's Investors Service said.
A "successful implementation" of the measures Chancellor of the Exchequer George Osborne outlined in his June 22 budget would see the debt ratio peak "slightly under" 90pc of Gross Domestic Product (GDP) in the 2013-2014 fiscal year before gradually declining, Moody's said in a statement yesterday. "The political economy of the UK is conducive to the severe cuts in expenditure that will be needed to restore the health of public finances," the ratings company commented.
"This course of events would ensure that, in all but the most extreme interest rate scenarios, the UK's debt affordability would remain consistent with an Aaa rating."
Surveys and employment data suggest that the pace of the British economy's recovery is stronger than suggested by GDP figures, Moody's said.
The economy officially expanded 0.3pc in the first quarter after emerging from its deepest recession since World War Two in the final three months of 2009.
Moody's warned there were "implementation risks" associated with the budget, including the potential impact on growth from the austerity measures.
Mr Osborne's plans to cut spending as part of the emergency budget will slice £85bn (€100bn) from government spending, equivalent to 5.7pc of GDP, according to estimates from the Institute for Fiscal Studies.