October 13, 2022
Fitch Ratings reduced its credit rating outlook for British government debt to “negative” from “stable”, following the government’s fiscal statement on September 23, 2022.
They warned that the sizeable and unfunded fiscal package outlined as part of the new government’s growth strategy may result in a material increase in fiscal deficits over the medium term.
Fitch reaffirmed Britain’s “AA-” credit rating, one notch lower than Standard & Poor’s.
In the Sept. 23 statement, Finance Minister Kwasi Kwarteng pledged 45 billion pounds ($51 billion) in unfunded tax cuts, along with hefty energy subsidies and other measures aimed at encouraging growth, but financial markets were hesitant at the additional borrowing.
Sterling hit a record low against the US dollar, and some British government bonds plunged by the greatest in decades, causing the Bank of England to intervene to restore market stability.
According to Fitch, Britain’s general government deficit will be 7.8% of GDP this year and 8.8% in 2023, with general government debt reaching 109% of GDP by 2024.
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