(Alliance News) - S&P Global Ratings on Friday said it will make no change to the UK's AA sovereign debt rating and Negative outlook, but warned that it could lower the rating in the event of a disorderly Brexit.
The UK government debt rating is supported by its high income levels, its large and diversified economy and financial sector, its developed product and labour markets, and the strength and independence of key institutions, S&P said.
The ratings are supported by sterling's reserve currency status and the UK's ability to issue high levels of debt at very long maturities in its own currency, the ratings agency added.
S&P's negative outlook reflects the risk of sustained economic weakness and a deterioration in government finances if merchandise and services exports from the UK lose access to key European markets, external financing diminishes, or sterling's status as a reserve currency comes under pressure.
"We could lower the ratings in the event of a disorderly Brexit. We define a disorderly Brexit as one in which the UK leaves the EU without a deal. In such a scenario, we expect UK manufacturing and services' access to key European markets would be significantly limited and these sectors would be subject to tariffs and nontariff barriers, reducing their ability to compete," S&P said.
The ratings agency expects the UK government debt-to-GDP ratio to rise through 2022, as all major political parties have committed to increase funding for public services. S&P projects UK economic growth to average 1.3% over 2020-2022, if the country does not leave the EU without a deal.
By Tapan Panchal; tapanpanchal@alliancenews.com
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