May’s vision for Britain fails to halt downgrade of credit rating

BRITAIN faces a bleak economic future because of Brexit, according to a shocking verdict by a credit ratings agency.

Moody’s cut its rating for UK Government debt amid growing fears that the decision to withdraw from the EU will do long-term damage to the economy.

The announcement late on Friday night is a blow to Prime Minister Theresa May who just hours earlier had delivered a landmark speech offering her vision for leaving the European Union.

It means her administration becomes only the second UK Government in four decades to suffer a rating downgrade from the agency.

The cut will mean the Government will find it harder to borrow money to fund Brexit plans without paying higher interest rates. Moody’s complained that UK civil servants will be ‘increasingly distracted’ by the challenges of Brexit instead of running the country and fixing the economy.

‘Moody’s expects weaker public finances going forward, partly linked to the economic slowdown under way but also reflecting the increasing political and social pressures to raise spending after seven years of spending cuts,’ it said.

‘The challenges for policymakers and officials are substantial and rising,’ it said. Moody’s said the reduction in Mrs May’s parliamentary majority also meant uncertainty over future economic policy.

It added: ‘Moody’s is no longer confident that the UK Government will be able to secure a replacement free trade agreement with the EU which substantially mitigates the negative economic impact of Brexit.’

Moody’s first downgraded UK debt in 2013 amid former Chancellor George Osborne’s austerity programme.

Friday’s downgrade to Aa2 means the UK is now two notches below the prime AAA rating enjoyed by other countries including Germany, Norway and Sweden.

Mrs May’s speech in Florence had been billed as a Brexit reboot that would help ease tensions in negotiations. Her comments that Britain would ‘honour commitments’ was taken as tacit agreement the UK could put as much as £40 billion on the table and fund a two-year transition.

But Liberal Democrat leader Vince Cable said: ‘The warning that Moody’s have issued by downgrading the credit rating is that the economy will be weaker once the transitional deal comes to an end. All May has done is simply delay the economic pain caused by an extreme Brexit.’

The Moody’s cut means the UK now has the same rating as France and South Korea.

The other two major ratings agencies Fitch and Standard & Poor’s both downgraded UK debt by one notch to AA in the days after last year’s referendum.