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S&P prepares UK Ratings downgrade as Britain votes to leave EU
[LONDON] S&P Global Ratings is preparing to remove the UK's top credit grade after the country voted to leave the European Union.
S&P will give the country 24-hours notice, including one working day, to lower the rating "at least one notch" from AAA, Moritz Kraemer, S&P's global sovereign chief ratings officer, said in an interview on Bloomberg Television on Friday. The decision will bring the S&P rating in line with its major peers. Fitch Ratings and Moody's Investors Service reduced the UK to their second-highest levels in 2013.
The move follows the count in Britain's EU referendum, which saw voters choose to quit the bloc by 52 per cent to 48 per cent as the government's pro-EU campaign was defeated by more than 1 million ballots. Global markets buckled, infecting every asset class, sending the pound plunging the most on record and the euro to its biggest decline since it was introduced in 1999.
UK government bonds surged amid speculation the Bank of England will maintain an easy monetary policy to ward off the risk of recession after the vote.
Mr Kraemer had said this week that a decision to exit the trading bloc would result in a "pretty much binary" outcome of Britain losing its top rating. Bank of England Governor Mark Carney said in the buildup to the vote that it was the biggest risk to UK domestic financial stability and could cause a recession.
UK economic growth slowed in the first quarter and surveys have signaled a further loss of momentum this quarter. The BOE's comments echoed warnings from organizations including the International Monetary Fund and the Organization for Economic Cooperation and Development about the potential negative impact of Brexit.