UK leadership change raises risk of looser fiscal stance: Moody's

[LONDON] Ratings agency Moody's Investors Service welcomed the faster-than-anticipated change in leadership of Britain's government but said it also increased the risk of a looser fiscal stance.

"It is positive that the period to select a new prime minister will be shorter than anticipated. But the important question is how the negotiations around the EU withdrawal unfold and, ultimately, what alternative trade arrangements are put in place," Kathrin Muehlbronner, Senior Vice President at Moody's said in an emailed statement on Tuesday.

"The change in leadership of the government, along with potential political pressures stemming from weaker growth, creates uncertainty around the fiscal stance in future years. It also increases the risk of a looser stance than we have assumed so far."

Theresa May is due to become the Britain's new prime minister on Wednesday after the ruling Conservative Party's leadership contest was cut short when her only remaining rival dropped out of the race on Monday.

Ms May has said Britain should no longer pursue its previous target of turning a budget deficit into a surplus by 2020 given the potential economic stress following the June 23 shock decision by voters to leave the European Union.

Moody's said on June 24 that Britain's creditworthiness was at greater risk after the referendum result and it assigned a negative outlook to its 'Aa1' rating for British government debt.

REUTERS

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