U.K. AAA Rating Now Faces Greater Downgrade Risk, Fitch Says

Fitch Information Display (Photo credit: Bryan Loar)

 London, Jan.29, stock investment .- The U.K. faces an increased risk of a downgrade to its top credit rating after Fitch Ratings said that government debt will peak at a higher level and later than it previously predicted. Fitch affirmed Britain's AAA level  and kept the nation on negative outlook, according to a statement released today in London. The ratings company said it doesn’t expect to resolve the question mark hanging over the top grade until 2014.

“The negative outlook on the U.K. rating reflects the very limited fiscal space, at the ’AAA’ level, to absorb further adverse economic shocks in light of the U.K.’s elevated debt levels and uncertain growth outlook,” Fitch said in the statement. “Weaker than expected growth and fiscal outturns in 2012 have increased pressure on the U.K.’s AAA rating.”

The assessment comes a week after Britain posted its biggest August budget deficit on record and adds pressure on Chancellor of the Exchequer George Osborne as the economy recovers from three quarters of contraction. Fitch cut its forecast for economic growth this year to show it will shrink 0.3 percent this year instead of expanding by 0.8 percent.

The pound slid 0.5 percent to $1.6157 at 6:37 p.m. London time. Fitch, Moody’s Investors Service and Standard & Poor’s all give the U.K. their top rating, though only S&P assesses the country’s credit rating as stable.

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