Fitch lowers UK rating outlook to ‘negative’

This rating downgrade comes a few days after a similar decision by the S&P agency, linked to the significant tax cuts announced by the British government.

Rating agency Fitch lowered the UK’s rating outlook on Wednesday fromsign” a “negative», a few days after a similar decision by the S&P agency, linked to the important tax cuts announced by the British government on September 23. These measures adopted to promote growthcould lead to a significant increase in fiscal deficits in the medium termFitch said in his statement.

The US agency maintained the rating of British sovereign debt at AA-, one notch below that of S&P. But the drop in the outlook points to the risk of a downgrade in this rating if the country’s economic situation does not improve. The budget packageannounced without compensation measures or an independent evaluation of its impact on public finances, and the discrepancy between fiscal and monetary policies, given the strong inflationary pressures, had, in Fitch’s opinion, negative consequences for consumer confidence, financial markets and the credibility of politicians. structure“, details the agency.

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Liz Truss, who arrived in Downing Street in early September, and her Chancellor of the Exchequer, Kwasi Kwarteng, announced on 23 September a massive plan to support household energy, accompanied by huge tax cuts. The absence of figures on the size of the budget mega-package and projections on the impact of this massive spending plan – with no planned spending cuts and debt financing at a time when inflation is soaring and rates are rising – set financial markets on fire. last week. The pound fell on September 26 to its historical low.

The British leader and her minister initially defended her approach before finally announcing on Monday that they would abandon some of the most controversial measures, notably the abolition of the lowest tax rate for the highest income bracket. UK government long-term borrowing rates have soared, making it more expensive to finance UK debt at a time when inflation is soaring to almost 10%, the highest in the G7, and where London wants to borrow much more.

All the stimulus measures, between aid for energy bills and total tax cuts (social security contributions, corporate tax, environmental contributions, etc.), are estimated at between 100 and 200 billion pounds by the economists, but it has not been fully budgeted. by the Government. On Friday, the S&P rating agency lowered its forecast for Britain’s rating, and rival agency Moody’s had already warned Kwasi Kwarteng that his fiscal strategy was at risk.permanently weaken the country’s ability to finance itself at an affordable costThe International Monetary Fund got involved, abruptly and unusually calling on Downing Street to correct the situation.

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