S&P stands by Britain’s triple A rating
Standard & Poor’s on Friday stood by Britain’s triple A rating and gave it a stable outlook on Friday night in spite of fears for the top-notch seal of approval after poor GDP figures this week.
The ratings agency restamped the country’s sovereign debt with its highest grade on expectations that the economy would gather steam toward the end of the year.
Leading bond investors issued warnings about the safety of the triple A rating this week after output fell 0.7 per cent in the three months to June.
The S&P move will be a boon for chancellor George Osborne whose austerity policies came under pressure after the figures were released.
But the agency said: “We project that despite recent weakness, the UK economy should begin to recover in the second half of 2012 and steadily strengthen, and we expect economic policy to continue focusing on closing the fiscal gap.”
“In our view, monetary flexibility remains a key credit strength owing to the British pound’s role as a global reserve currency,” the statement added.
Britain’s economy shrank far more than expected in the second quarter, battered by everything from an extra public holiday for the royal jubilee to government spending cuts, the weather and the neighbouring eurozone crisis, GDP figures showed this week.
But S&P on Friday said its outlook for the rating was stable, reflecting “our expectation that the UK government will implement the bulk of its fiscal consolidation programme and that the economy should recover in the remainder of 2012 and strengthen thereafter.”
Rival agency Moody’s put the UK on negative outlook in February this year.
At the time of the GDP data Mr Osborne admitted the country had “deep-rooted economic problems”, but maintained the coalition was “dealing with our debts at home and the debt crisis abroad”.
Last week, the International Monetary Fund said prime minister David Cameron’s government might have to ease up on budget cutting if the economy continued to struggle.
S&P said it expected the Bank of England to keep interest rates low to help the economy.