Other reasons are risks to the UK’s debt affordability from likely higher borrowing and a sustained weakening in policy credibility, Moody’s said in a note.

Moody’s Investors Service recently changed the outlook on the UK government ratings to negative from stable and affirmed the domestic and foreign-currency long-term issuer and domestic-currency senior unsecured ratings at Aa3. The reasons cited include heightened unpredictability in policymaking amid weaker growth prospects and high inflation.

The outlook on the Bank of England’s (BoE) ratings has also changed to negative from stable and its Aa3 long-term foreign- and domestic-currency issuer and foreign-currency senior unsecured bond ratings, as well as its (P)Aa3 foreign-currency senior unsecured medium-term note (MTN) programme rating have been affirmed.

The short-term domestic- and foreign-currency issuer ratings have also been affirmed at Prime-1. Moody’s rates the BoE at the same level as the Government of the UK given it is an essential part of the government’s economic policy framework and is fully owned by the government.

The UK’s local and foreign currency country ceilings remain unchanged at Aaa.

The three-notch gap between the local currency ceiling and the sovereign rating is driven by the government’s relatively small footprint in the economy, a fairly robust external payments position and a diversified economy.

The foreign currency ceiling at the same level as the local currency ceiling reflects a fully convertible capital account as well as reasonably effective policy management, Moody’s observed.

Fibre2Fashion News Desk (DS)