Tony Ward is chief executive of Homefunding
The latest news from Fitch doesn’t seem like good news. The ratings agency announced on Wednesday that the UK’s highly-prized AAA credit rating was at risk and more likely than not to be downgraded. It said the ‘risks and uncertainty’ surrounding the coalition’s austerity plans were “material”.
The credit rating agency put a slightly greater than one in two chance on a downgrade for the UK over the next two years. This follows Moody’s report last month that also put Britain’s AAA rating on a negative outlook.
This has spooked the markets somewhat although Standard & Poor’s is yet to follow along the same path, maintaining the UK’s current AAA status.
Some would say that this is a major setback for George Osborne ahead of the Budget and gives him little room to manoeuvre and give any unfunded handouts.
However it can be argued that this gives him the perfect excuse to stand firm and maintain his tough stance on austerity measures. In fact the Treasury has already said that the decision by Fitch was a lesson for anyone hoping for giveaways in the Budget.
I think on the whole the Chancellor is right to take this stance. I am much more optimistic about the state of the economy going forward than I have been for a long time, albeit unemployment remaining stubbornly high.
I believe the government should stick to its fiscal austerity plans and in doing so, I predict that we will see modest growth in the second half of 2012.
So the message is stand firm. In doing so I believe that the UK is likely to retain its AAA rating.
Steady as she goes.