Moody’s has revised Friday to negative from stable the outlook for the rating of the United Kingdom after the victory of Brexit, meaning it could lower the rating in the near future.
Moody’s estimates that begins “a prolonged period of uncertainty “that will have” negative implications for the medium-term growth prospects “of the British economy. The debt rating to Aa1 is maintained.
“In the few years that the UK will have to renegotiate its trade relations with the European Union, Moody’s expects a revival of uncertainty, decreased confidence and lower investments lead to lower growth, “the agency said in a statement.
It also fears that the country’s public finances weaken more than expected . “The negative impact of lower growth will exceed the savings that the UK will no longer contribute to the EU budget,” says Moody’s.
The agency points out that EU is the largest trading partner of the United Kingdom, absorbing 44% of exports and 48% of foreign direct investment to the UK also come from the EU.
“It is possible that the United Kingdom is able to redirect its trade to other regions and thus compensates for a weaker trade with Europe, but it will take time, “warns the agency. However, it believes that the country should reach agreement with the European Union to preserve “most, but not all trade”.
“There are clearly downside risks,” concludes Moody’s, adding that “in the absence of a trade agreement that preserves the core of the current access to the UK market unique (…) the growth of its gross domestic product will be materially lower. “
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