The UK is desperate, divided and now downgraded

Renowned ratings agency Standard & Poor has removed the United Kingdom’s coveted AAA status because the vote to leave the

Renowned ratings agency Standard & Poor has removed the United Kingdom’s coveted AAA status because the vote to leave the European Union has given the county a long-term negative outlook.

“In our opinion, this outcome is a seminal event, and will lead to a less predictable, stable and effective policy framework in the UK,” a statement from the agency reads.

“The Brexit result could lead to a deterioration of the UK’s economic performance, including its large financial services sector, which is a major contributor to employment.”

It adds that such a negative outlook presents great risk to the economy and the future of the sterling as a reserve currency.

S&P also notes that the possibility of a future referendum on Scottish independence places further risk on the integrity of Britain’s constitution and economy.

With the rating now downgraded by two notches to AA, many have taken to social media to criticise the 52 per cent in favour of leaving the EU.

Credit ratings are important at a country level because many countries rely on foreign investors to purchase their debt. A country with a good credit rating has the benefit of being able to access funds from outside of their country. However, that the UK has been assessed as unstable and, in this case, for the long-term it could struggle to attract investment.

Since the Brexit vote was taken there has been a 14 per cent fall in the FTSE, a 12 per cent drop in the value of the British pound and a loss of its AAA credit rating, the latter of which is said to cost the UK billions extra in government loans.

Are you concerned about the impact of the UK’s decision to leave the EU on Australia? Do you worry about what similar uncertainty in Australia can do to the Australian economy?

  1. Bruce Taylor  

    There is little doubt that the few who control the large majority of the worlds money are going to try to punish Britain for leaving the EU. Obviously S&P are saying that we are taking away your AAA credit rating because you voted to exit.
    For far too long these people have controlled the purse strings of the world and every day the rich get richer and the poor get poorer. One could almost be forgiven for believing the old tales of the Knights Templar.

  2. John M Lambert  

    Standard & Poors action is premature and irresponsible. The reality is that people who make money out of generating variations in the values of currency, and generate variations in the values of shares FOR THEIR PROFIT initially pushed up the value of the UK pound from US$1.43 (the average value since the start of the year) to US$1.50 on the assumption that UK would vote to stay in EU. THEY WERE WRONG! So then it dropped – now around US$1.33 and increasing. So the actual drop is smaller – US$1.43 to US$1.33 or 7%, not the 12% stated above. AND over the last 10 years (UK has had AAA rating for over 30 years) exchange rate has varied from US$1.38 to US$2.11 with a median around US$1.65 with no change in rating! These rating agencies are creating more issues than they deserve

    • Susan Gabriel.  

      That’s reassuring, thank you @John M Lambert, I live in France and have a UK pension so every four weeks it gets converted into euros and sent to my French bank account, that 12 per cent drop had me worried! Thankfully I have two little French pensions from working in France so my income is completely dependant on currency values.

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