UK credit score outlook revised to negative by Moody’s on political drama

(Bloomberg) – The outlook for the UK’s credit rating has been revised to negative by Moody’s Investors Service, which cited factors such as increased unpredictability in policy-making.

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The company confirmed the country’s rating at Aa3, according to a statement. The rating action comes weeks after the company warned that the UK government’s mini budget, which was later scrapped by outgoing Prime Minister Liz Truss, risked lasting damage to the country’s debt affordability.

The ratings firm said the change in outlook was driven by “increased unpredictability in policy-making” amid weaker growth prospects and high inflation and “risks to the affordability of debt linked to probably higher borrowings”.

He also noted a risk of a lasting weakening of the credibility of policies.

Truss stepped down after a brief and chaotic 44-day tenure that saw her announce a massive package of unfunded tax cuts before unwinding most of them in the face of a savage four-week market rout. His premiership saw gilt yields post some of their biggest moves on record and the pound tumbled to an all-time low. The pound gained more than 1% after confirming his resignation on Thursday.

Fitch Ratings and S&P Global Ratings lowered the country’s outlook to negative after Truss’ tax cut plans amid growing fiscal risks. S&P rates the country AA, the third highest level, while Fitch Ratings rates it a lower level at AA-.

–With the help of Libby Cherry.

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