UK CREDIT RATINGS
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)