Beautiful Virgin Islands

Thursday, Jun 05, 2025

Moody's: UK's economic outlook now 'negative', ratings agency says

Moody's: UK's economic outlook now 'negative', ratings agency says

The UK's economic outlook has been lowered to "negative" by ratings agency Moody's due to political instability and high inflation.
Moody's changed the UK's outlook - which is a marker of how likely it is to pay back debts - from "stable".

Rating agencies, in essence, rate a country on the strength of its economy.

Moody's along with another of the big credit rating agencies Standard & Poor's (S&P) maintained their assessments of the UK's credit rating.

Rating agencies give governments (or large companies) a score on how likely they are to pay back their debt.

The rating affects how much it costs governments to borrow money in the international financial markets. In theory, a high credit rating means a lower interest rate (and vice versa).

Each agency gives countries around the world a specific credit rating score. These range from a top mark of "AAA", which stands for "prime", down to the lowest reading of "D", which stands for "in default".

Moody's said there were "risks to the UK's debt affordability", but kept its rating of Aa3, the fourth-highest level on its scale.

Meanwhile, S&P maintained the UK's rating of AA - its third highest rating level - and maintained its previously-changed outlook from stable to negative.

The reports published on Friday do not mean the UK's credit rating has been downgraded, but a negative outlook indicates it could be downgraded at a later date. The other outlooks countries can be given are positive, or stable, and any outlook period typically lasts 12 to 18 months.

Moody's said there were two "drivers" behind its decision to change the UK's economic outlook.

It said the first was "the increased risk to the UK's credit profile from the heightened unpredictability in policymaking amid a volatile domestic political landscape".

Moody's said this challenged the UK's "ability to manage the shock arising from weaker growth prospects and high inflation".

The rating's agency said it viewed the government's mini-budget, the reversal of the majority of the policies in it, and the change in prime minister as a "continuing reflection of the weakening predictability of fiscal policymaking seen in previous years".

Moody's assessment comes after government borrowing costs rose sharply in the aftermath of the mini-budget in September when investors became spooked by the then chancellor Kwasi Kwarteng pledging huge tax cuts without saying how the government would pay for them.

The current chancellor, Jeremy Hunt, reversed the majority of the tax cuts from the mini-budget on Monday in attempt to calm the markets, but the resignation of Prime Minister Liz Truss means economic policies are on hold.

"The government's initial inability to deliver a credible policy response to address investor concerns around this unfunded stimulus further weakened the UK's policy credibility, which is unlikely to be fully restored by the subsequent decision to reverse most of the tax cuts," Moody's said.

Moody's said the second driver of its decision to change the outlook was the "heightened risks to the UK's debt affordability from likely higher borrowing and the risk of more persistent inflation".

A spokesman for the Treasury said global financial markets had been "subject to significant volatility in recent weeks".

"While no national government can eliminate this, we can give certainty about the sustainability of public finances in the UK," a statement added.

"The underlying fundamentals of the British economy remain strong, with the UK having the second lowest net debt to GDP ratio in the G7 and unemployment at its lowest level in almost 50 years."

The spokesman said the government was focused on "delivering economic stability and sustainable growth".

Government borrowing costs rose on Friday, while the pound sank as investors reacted to gloomy economic data amid the political turmoil.

The interest rate - or yield - on bonds due to be repaid in 30 years' time rose back above 4%, making government borrowing more expensive. They had hit 5.17% in the aftermath of the mini-budget.

Meanwhile, the yield on bonds due to be repaid in five years' time, which underpins the cost of new five-year fixed rate mortgages, rose to 4.09%.

The Treasury said the chancellor would set out how the government will get debt falling on 31 October, alongside a full forecast from the Office for Budget Responsibility on his economic policies.
Newsletter

Related Articles

Beautiful Virgin Islands
0:00
0:00
Close
Global News Roundup: From Ukraine's strategic military strikes and Russia's demands and Tensions Escalate in Ukraine, to serious legal issues faced by Britons in Bali and Trump's media criticism, the latest developments highlight a turbulent landscape
Majority of French Voters View Macron's Presidency as a Failure
Hungary Partners with China to Boost Electric Vehicle Production
‘Vibe Coding’ Emerges as the New DIY Trend
AI Pioneer Yoshua Bengio Warns Models Can Deceive Users
Big Four Firms Rush to Create AI Auditing Systems
Musk’s xAI Pursues $113 Billion Valuation in New Share Sale
Walmart Increases Revenue Despite Shrinking Workforce
Hims & Hers Plans UK and EU Launch of Replica Obesity Drugs
Toyota to Acquire Supplier in $33 Billion Buyout
U.S. Reduces Military Presence in Syria
Trump Demands Iran End All Uranium Enrichment in Nuclear Talks
China Accuses US of Violating Trade Truce
Panama Port Owner Balances US-China Pressures
France Implements Nationwide Outdoor Smoking Ban to Protect Children
German Chancellor Merz Keeps Putin Guessing on Missile Strategy
Mandelson Criticizes UK's 'Fetish' for Abandoning EU Regulations
British Fishing Boat Owner Fined €30,000 by French Authorities
Dutch government falls as far-right leader Wilders quits coalition
Harvard Urges US to Unfreeze Funds for Public Health Research
Businessman Mauled by Lion at Luxury Namibian Lodge
Researchers Consider New Destinations Beyond the U.S.
53-Year-Old Doctor Claims Biological Age of 23
Trump Struggles to Secure Trade Deals With China and Europe
Russia to Return 6,000 Corpses Under Ukraine Prisoner Swap Deal
Microsoft Lays Off Hundreds More Amid Restructuring
Harvey Weinstein’s Publicist Embraces Notoriety
Macron and Meloni Seek Unity Despite Tensions
Trump Administration Accused of Obstructing Deportation Cases
Newark Mayor Sues Over Arrest at Immigration Facility
Center-Left Candidate Projected to Win South Korean Presidency
Trump’s Tariffs Predicted to Stall Global Economic Growth
South Korea’s President-Elect Expected to Take Softer Line on Trump and North Korea
Trump’s China Strategy Remains a Geopolitical Puzzle
Ukraine Executes Long-Range Drone Strikes on Russian Airbases
Conservative Karol Nawrocki wins Poland’s presidential election
Study Identifies Potential Radicalization Risk Among Over One Million Muslims in Germany
Good news: Annalena Baerbock Elected President of the UN General Assembly
Apple Appeals EU Law Over User Data Sharing Requirements
South Africa: "First Black Bank" Collapses after Being Looted by Owners
Poland will now withdraw from the EU migration pact after pro-Trump nationalist wins Election
"That's Disgusting, Don’t Say It Again": The Trump Joke That Made the President Boil
Trump Cancels NASA Nominee Over Democratic Donations
Paris Saint-Germain's Greatest Triumph Is Football’s Lowest Point
OnlyFans for Sale: From Lockdown Lifeline to Eight-Billion-Dollar Empire
Mayor’s Security Officer Implicated | Shocking New Details Emerge in NYC Kidnapping Case
Hegseth Warns of Potential Chinese Military Action Against Taiwan
OPEC+ Agrees to Increase Oil Output for Third Consecutive Month
Jamie Dimon Warns U.S. Bond Market Faces Pressure from Rising Debt
Turkey Detains Istanbul Officials Amid Anti-Corruption Crackdown
×