Moody’s lowered its outlook on the U.K.’s debt rating, saying the handling of Brexit has shown public institutions at risk of losing predictability
The ratings company cited the “increasing inertia and, at times, paralysis that has characterized the Brexit-era policy-making process” in stamping a negative outlook on the country’s rating.
For now, the U.K.’s rating remains in the second tier of developed countries at Aa2, similar to South Korea and France, but below the top notch Aaa ratings Moody’s assigns to the U.S. and Germany.Moody’s announcement comes with a general election approaching on Dec. 12 and the question of the U.K.’s exit from the European Union unresolved. Both major political parties, Boris Johnson’s Conservatives and Jeremy Corbyn’s Labour Party, have vowed to boost government spending.
The U.K.’s public debt is around 85% of the size of the economy, little changed in recent years, and lower than that of the U.S., whose gross public debt is around 106%, according to the International Monetary Fund. Moody’s said increased spending could be good for economic growth but said fixed costs on things like health care, and lower business investment as a result of Brexit could leave the country’s balance sheet vulnerable.
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