RTTNews - Thursday, the Standard & Poor's revised the outlook on the United Kingdom to negative from stable. The rating agency affirmed 'AAA' long-term and 'A-1+' short-term sovereign credit ratings.
Standard & Poor's credit analyst David Beers said, We have revised the outlook on the U.K. to negative due to our view that, even assuming additional fiscal tightening, the net general government debt burden could approach 100% of GDP and remain near that level in the medium term.
Rating outlooks assess the potential direction of a rating, typically over a period of up to two years. Beers added that the opinion is based on the latest updated projections of general government deficits in 2009-13.
According to S&P, the projections reflect more cautious view of how quickly the erosion in the government's revenue base may be repaired, the extent to which the growth in government spending can be curtailed, and accordingly the pace at which historically high fiscal deficits are likely to narrow.
Projections also incorporated updated estimates of the cumulative potential gross fiscal cost of government support to the banking system, which is now estimated to be in the range of GBP 100 billion to GBP 145 billion.
The rating agency assessed that these factors together could result in a doubling of the general government debt burden to nearly 100% of GDP by 2013.
The rating could be lowered if we conclude that, following the election, the next government's fiscal consolidation plans are unlikely to put the U.K. debt burden on a secure downward trajectory over the medium term, Beers said.
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