London October 22 2022: The outlook for the UK’s credit score was revised to negative by Moody’s Investors Service, which cited factors including increased unpredictability in policymaking.
The company affirmed the country’s rating at Aa3, according to a statement. The rating action comes several weeks after the firm warned the UK government’s mini-budget, which was later scrapped by outgoing Prime Minister Liz Truss, risked doing lasting damage to the nation’s debt affordability.
The rating firm said the change in the outlook was driven by “heightened unpredictability in policymaking” amid weaker growth prospects and high inflation and “risks to debt affordability from likely higher borrowing.”
It also noted a risk of a sustained weakening in policy credibility.
Truss resigned after a brief and chaotic 44-day tenure that saw her announce a massive package of unfunded tax cuts before unwinding most of it in the face of a wild four-week-long market rout. Her premiership saw gilt yields post some of their biggest moves on record and the pound sink to an all-time low. Sterling rallied more than 1% after she confirmed her resignation on Thursday.
Both Fitch Ratings and S&P Global Ratings lowered the country’s outlook to negative after Truss’ tax cut plans amid rising fiscal risks. S&P rates the nation AA, the third highest level, while Fitch Ratings scores it one level lower at AA-.