U.K. debt rating lowered by Moody’s on slower growth, Brexit

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Moody’s Investors Service on Friday downgraded the U.K.’s debt to Aa3 from Aa2, saying economic growth “has been meaningfully weaker than expected and is likely to remain so in the future.” Moody’s had last downgraded the U.K.’s bonds in September 2017. The decision to leave the EU has exacerbated that, the ratings agency said. “Growth will also be damaged by the scarring that is likely to be the legacy of the coronavirus pandemic, which has severely impacted the U.K. economy,” Moody’s said. In addition, the country’s “fiscal strength has eroded,” with debt rising from already high levels, and U.K.’s institutions and governance are weaker, Moody’s said. “Policymaking, particularly with respect to fiscal policy, has become less predictable and effective. Looking forward, the self-reinforcing combination of low potential growth and high debt in a fractious policy environment will create additional headwinds,” the debt ratings said.
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