UK warned of possible rating downgrade: Moody's

The UK's credit rating may be cut in future, it has been warned which could potentially increase its borrowing costs. The statement from ratings agency Moody's came amid concerns over the possible impact of the eurozone crisis on the prospects for the UK's growth.

The ratings agency put UK on "negative outlook", denoting a 30-per cent chance of losing its AAA credit rating within 18 months.

France and Austria also stand warned while Italy, Spain and Portugal have had their ratings lowered.

According to chancellor George Osborne, the US agency's comments did not amount to a criticism of his government's economic policy. Osborne told the BBC that it was a reality check for the whole political system and that Britain had to deal with its debts, and not waver in the path.

He added this was yet another organisation, a credit ratings agency in this case, warning Britain that if it spent or borrowed too much it would lose its credit rating.

However, according to shadow chancellor Ed Balls, Moody's statement was a warning to the UK. He told the BBC that unless Britain had growth, and plan was balanced, it would become self-defeating and today was the first evidence that even the ratings agencies were waking up to the fact George Osborne's plan was not working.