The United Kingdom’s credit rating is downgraded by Moody’s to Aa3 from Aa2 with a stable outlook, citing softer economic growth, an erosion of fiscal strength and a weakening in institutions and governance.
The pound pared gains slightly against the dollar to $1.2914 after the announcement.
“Negative long-term structural dynamics have been exacerbated by the decision to leave the EU and by the U.K.’s subsequent inability to reach a trade deal with the EU that meaningfully replicates the benefits of EU membership,” Moody’s says.
Britain’s growth has been “meaningfully weaker than expected and is likely to remain so in the future.”
Fitch Ratings downgraded the U.K. to AA- in March, citing the weakening of public finances caused by the impact of COVID-19, while S&P currently rates the country at AA.