Britain's top rating looks set to survive despite threat

The warning, however, will stain the coalition government's economic record and a fuel the ongoing debate over whether a different policy mix to bring the economy back on the recovery track.

But while a downgrade would come as a major blow to Chancellor George Osborne, who has vowed to erase the budget deficit within five years, many economists doubt that it would significantly drive up borrowing costs for the country.

"We do not expect the UK to be downgraded, but believe such an event would still not affect the draw of the gilt market," said Nomura economist Philip Rush.

Britain's recovery from the steep slump in 2008/2009 has been weak. Unemployment -- already at a 17-year high -- is set to rise further, and Bank of England governor Mervyn King has warned the way back to growth would be long and arduous.

But still, Britain is enjoying near record-low borrowing costs as investors view its bonds as a relative safe haven in the global debt storm despite a deficit worse than that of France, which saw its AAA-rating stripped by Standard & Poor's at the end of last year.

Britain, which has already had to give up on balancing the books by the time of the next election in 2015, is aiming for a budget deficit of 8.4 percent of national economic output in the 2011/12 fiscal year, falling to 7.6 percent in 2012/13.

In contrast, France is hoping to run a budget deficit of about 4.5 percent of national economic output this year, while the United States is seen posting a deficit of 6.2 percent.

SAFE HAVEN

There are several crucial factors why Britain is seen as safer than most. The average maturity of its debt -- which dictates when the government has to reimburse investors -- is 14 years, much longer than many nations, according to the Debt Management Office, giving it a lot of breathing space.