Moody's strips UK of 'AAA' sovereign rating

The UK suffered its first ever sovereign ratings downgrade from a major agency yesterday when it was stripped of its coveted top-notch triple-A rating, by Moody's dealing a major blow to finance minister George Osborne.

According to Moody's, weak prospects for British economic growth, which had thrown the government's deficit reduction strategy off course, were behind its decision to cut the rating by one notch to Aa1 from Aaa.

Chancellor George Osborne has been pushing an austerity led fiscal policy since his Conservative-led coalition assumed power in 2010 after an election in which he vowed to defend Britain's triple-A rating, which could help keep borrowing costs down.

However, a very slow recovery from the financial crisis had pushed back by at least two years the government's goal of largely eliminating the budget deficit by the election to be held in 2015.

According to the opposition Labour Party the deficit was due to too much austerity.

However, Osborne insists it is not the time now  to change course. His annual budget due 20 March is expected to show a further deterioration in the country's fiscal outlook.