UK Warned On Credit Rating

A leading global ratings agency has warned U.K. leaders that the country’s top credit rating could be jeopardized by a failure to adhere to austerity plans aimed at slashing public debt, according to The Daily Telegraph. On Wednesday, Moody’s Investors Service analyst Sarah Carlson said the U.K. could lose its Aaa rating, explaining that “slower growth combined with weaker-than-expected fiscal consolidation efforts could cause the UK’s debt metrics to deteriorate to a point that would be inconsistent with a Aaa rating.” However, the agency said the outlook for the country’s credit rating is stable.

The prospect of slowing growth as the government implements public spending cuts creates a difficult situation for officials, according to Howard Archer of IHS Global Insight, since weak growth could itself threaten the strength of austerity measures. He explained that disappointing economic growth would lead to lower tax receipts and increased spending on benefits, thereby weakening public finances. Archer said he expects Chancellor George Osborne to redouble efforts to implement the planned austerity program, but warned that Osborne would have to consider “very seriously” the potential need for tax cuts.

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