This rating downgrade comes days after a similar decision by the S&P agency, linked to the significant tax cuts announced by the UK government.
The rating agency Fitch on Wednesday downgraded the UK’s rating outlook fromstable“at”negative», a few days after a similar decision by the S&P agency, linked to the significant tax cuts announced by the British government on 23 September. These measures taken to promote growthcould lead to a significant increase in public deficits in the medium termFitch said in his statement.
The US agency maintained its UK sovereign debt rating at AA-, one notch below S&P. But the drop in outlook signals the risk of a downgrade of this rating if the country’s economic situation does not improve. The budget packageannounced without compensatory measures or an independent assessment of its impact on public finances, and the mismatch between fiscal and monetary policy, given the strong inflationary pressures, had, in Fitch’s view, negative consequences for consumer confidence. financial markets and the credibility of the political framework“, the agency states.
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Liz Truss, who arrived in Downing Street in early September, and her Finance Minister Kwasi Kwarteng announced on 23 September a massive energy support plan for households, accompanied by major tax cuts. The absence of figures on the size of the mega-budget package and projections of the impact of this massive spending plan – with no planned spending cuts and with debt financing at a time when inflation is soaring and rates are rising – set financial markets on fire. week. The pound fell to an all-time low on September 26.
The British leader and her ministers initially defended their approach before finally announcing on Monday that they would abandon some of the most controversial measures, notably the abolition of the lower tax rate for the upper income group. Long-term UK government borrowing rates have risen sharply, making financing British debt more expensive at a time when inflation is rising to almost 10%, the highest in the G7, and when London wants to borrow much more.
All the stimulus measures, between support for energy bills and overall tax cuts (social security contributions, corporation tax, environmental contributions etc.), are estimated at between £100 and £200 billion by economists, but have not been fully calculated by the government. On Friday, ratings agency S&P cut its forecast for Britain’s rating, and rival agency Moody’s had already warned Kwasi Kwarteng that its tax strategy risked “permanently impairing the country’s ability to finance itself affordably“. The International Monetary Fund got involved and pointedly – and unusually – called Downing Street to rectify the situation.