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Credit rating agency upgrades UK's economic outlook

A key credit rating agency has upgraded its opinion of the future prospects for the UK economy in light of its "robust and broadening" recovery.

Standard & Poor's (S&P) affirmed its top AAA rating on British sovereign debt and said it was switching its outlook from "negative" to "stable".

Woman holds money £10 notes in hands.
S&P upgraded the UK economy from 'negative' to 'stable' in light of its 'robust and broadening' recovery. Credit: Mike Egerton/PA Archive/Press Association Images

S&P has forecast growth of nearly 3% this year and 2.5% in 2015, saying it did not think fast-rising London house prices posed a risk to stability and that future rises would be "more contained".

But it warned that the rating would be at risk should Britain vote to leave the EU in the in/out referendum promised by David Cameron if the Conservative Party wins the next General Election.

Treasury bullish after S&P reaffirms AAA credit rating

The Government said a top credit rating agency's latest forecast on the UK economy showed the Coalition was on the right track with plans to cut the deficit.

Standard & Poor's said Britain's cherished AAA long-term credit rating will stay for now, but warned there was a chance of a downgrade.

The Treasury said:

In today's reaffirmation of our credit rating, Standard & Poor's stress the government's commitment to continued fiscal consolidation.

They specifically say that a downgrade could be prompted by a change in the government's 'willingness and ability to implement its ambitious fiscal strategy'.

This serves as a reminder that our country cannot afford to simply run away from our problems.

– Treasury statement

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Britain's precarious AAA credit rating

The Standard and Poor's credit rating agency today confirmed the UK's AAA rating but warned that the outlook remained negative.

It means all three major agencies have now painted a bleak picture of Britain's economic outlook.

  • The Moody's rating agency downgraded the UK to Aa1 in February - the first time Britain had lost its AAA rating since 1978.
  • In March, the Fitch agency put the UK economy on negative watch, the first step to a credit rating downgrade.
  • S&P has now reportedly affirmed the UK's AAA status, but with the caveat that there is "at least a one-in-three chance" it could be downgraded.

Read more: What are credit ratings and why do they matter?

Report: 'One-in-three chance' UK could lose AAA rating

The Standard & Poor's credit rating agency said Britain remained at risk of losing its AAA rating, in a statement reported by the International Business Times.

"The outlook remains negative, reflecting our view of at least a one-in-three chance that we could lower the ratings if the UK's economic and fiscal performances were to weaken beyond our current expectations," S&P reportedly said.

Labour: Osborne is failing on all his economic tests

The shadow chancellor Ed Balls has responded to Standard & Poor’s putting Britain’s credit rating on negative outlook:

George Osborne is now failing on all the tests he set for his economic policies.

A week after having to admit he won’t balance the books or get the debt down by 2015, we have the unprecedented situation of all three main credit rating agencies putting Britain on negative outlook.

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S&P complete trio of credit agencies revising UK outlook

The Standard & Poor's credit rating agency's revision of the UK's outlook from stable to negative is the third such blow for the British economy this year:

  • Moody's rating agency placed the UK on negative outlook in February
  • In March, the Fitch agency followed suit, dropping the UK's outlook from stable
  • S&P today completed the trio of agencies warning that the UK's coveted AAA rating is in danger

'UK's economic reputation is on the line' - Osborne in 2009

On the only previous occasion S&P dropped the UK's outlook from stable to negative, George Osborne - then the shadow Chancellor - was quick to highlight its significance:

It's now clear that Britain's economic reputation is on the line at the next general election, another reason for bringing the date forward and having that election now.

For the first time since these ratings began in 1978, the outlook for British debt has been downgraded from stable to negative.

– George Osborne - speaking in 2009

The comments are in marked contrast to his recent views on the issue.

Osborne: Credit rating just one indicator of financial health

George Osborne admitted that he would miss his debt target in last week's Autumn Statement

Last week the ratings agency Fitch warned that the Government's missing its debt target "weakens the credibility of the UK's fiscal framework, which is one of the factors supporting the [AAA] rating".

But the Chancellor, in a marked change of tone, insisted that "the credit rating is one of a number of ways in which people look at countries."

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