S&P confirms UK is AAA
Despite sluggish growth, the UK’s “diversified” economy and “flexible” fiscal and monetary policy would enable it to weather a slowdown said the ratings agency.
It said the UK’s AAA rating could be re-evaluated if the government weakened its resolve to reduce public debt.
In an announcement S&P said: “The UK has affirmed its AAA long-term and A-1+ short-term sovereign credit ratings on the UK. The outlook remains stable.
“The decision reflects the country’s wealthy and diversified economy, fiscal and monetary policy flexibility and relatively adaptable product and labour markets.
“In addition, we view the UK as having deep capital markets with strong demand for long-dated gilts by domestic institutional investors.
“There is also demand from non-residents for sterling-denominated UK government debt, which provides some diversification to the UK’s investor base.
“The official assumption that the private sector will quickly step in to replace the withdrawal of public spending may prove optimistic, especially given weakening external demand.”
S&P’s forecast for the UK’s growth is 1.8% on average between 2011 and 2014.