Shares - - TALKING POINT -

Un­til 2013 the UK had an AAA sov­er­eign bond rat­ing, the high­est pos­si­ble level of credit rat­ing.

The big three credit agen­cies, Fitch, Moody’s and S&P, have sub­se­quently cut their rat­ings due to aus­ter­ity, high lev­els of in­debt­ed­ness and most re­cently fears that Brexit will dam­age the econ­omy.

S&P still rates the UK as AA but its out­look is neg­a­tive which means there is more than a one third chance of a down­grade in the next two years.

To put that in con­text, Italy is rated BBB by S&P which is six ‘notches’ or lev­els be­low the UK’s rat­ing while Greece and Tur­key are rated B+ which is 10 notches be­low the UK.

Even in a worst-case ‘no-deal’ Brexit sce­nario it is un­likely that the UK’s rat­ing will ap­proach those of Italy, Greece or Tur­key.

The big­gest com­pa­nies in the FTSE 100 are global busi­nesses and as such they tend to have the high­est credit rat­ings.

For ex­am­ple Royal Dutch Shell (RDSB) sports an AA- rat­ing (just one notch be­low the UK govern­ment) and Glax­o­SmithK­line

(GSK) sports an A+ rat­ing (two notches be­low).

More UK-fo­cused com­pa­nies will have lower rat­ings; for ex­am­ple, Lloyds (LLOY) has a BBB+ rat­ing. This may not look great along­side Glax­o­SmithK­line but it’s still one notch higher than Italy’s rat­ing. (IC)

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