S&P upgrades UK’s rating outlook to Stable

14 Jun 2014

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Standard & Poor's (S&P) on Friday upgraded its outlook on Britain's credit rating to 'Stable' from 'Negative', citing the broad recovery and progress in consolidating public finances; it has also reaffirmed its top 'AAA' rating.

S&P upgrades UK's rating outlook to Stable''The outlook revision reflects our view of the robust and broadening recovery in the UK economy, and the further progress that the government is making on consolidating public finances,'' it said in a statement.

But the rating major warned that the rating could be imperiled if Britain leaves the European Union, a move the country's Conservative Party has pledged to put to a referendum in 2017 if it wins the next general election.

S&P forecast that the British economy would expand by almost 3.0 per cent in 2014, and by 2.5 per cent in 2015, propelled by business investment and private consumption.

''We see improving credit and capital market conditions as supportive of growth, along with an expected gradual resumption of positive real wage gains,'' it noted.

''We anticipate that the UK's economic recovery will continue to broaden, benefitting the public finances'', it said adding that it expects the domestic economy to continue to expand, and rebalance away form a pre-crisis reliance on private consumption, as productivity performance underpins real wage gains and tradables sectors, both in services and manufacturing, continue to recover.

After adding it all up, S&P concluded there is only a one-in-three chance of a credit downgrade during the next two years.

''The GDP growth in the UK continues to impress on the high side on the back of strong consumer demand. However, we see tangible signs that the recovery is broadening to the corporate sector, and believe that growth in capital spending will pick up markedly this year and next'', it said.

The impressive recovery of the UK housing market will extend through the remainder of 2014, we believe, before cooling off somewhat next year in response to higher Bank of England (BoE) rates, it added.

Earlier on Friday, rival agency Fitch had affirmed its 'AA+' rating for Britain and gave it a 'Stable' outlook, citing also the country's accelerating economic recovery.

The country had been downgraded by to 'Negative' by S&P in December 2012 (See: S&P threatens to downgrade UK's credit rating, as it cuts outlook to negative). and in March 2013, Fitch followed by placing the country on a negative rating watch (Fitch places UK on rating watch negative).

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