S&P Downgrades UK Ratings, Revising Outlook

Rating agency Standard & Poor's has lowered the United Kingdom's unsolicited long-term foreign and local currency sovereign credit ratings to AA, two notches down from the previous AAA.

In a statement dated June 27, it also says it has lowered the long-term issuer credit rating on the Bank of England and the ratings on the debt programs of Network Rail Infrastructure Finance PLC, again by two notches down to AA.

The agency has also announced a negative perspective for the country in view of the referendum Britain held last week in which 52% of the electorate voted to leave the EU.

This outcome is a seminal event, and will lead to a less predictable, stable, and effective policy framework in the U.K. We have reassessed our view of the U.K.'s institutional assessment and now no longer consider it a strength in our assessment of the rating, " S&P has estimated.

The downgrade also is also a result of the risks of a marked deterioration of external financing conditions in light of the UK’s extremely elevated level of gross external financing requirements, according to the agency.

"Constitutional issues for the country as a whole" are also posed by the vote for "remain" in Scotland and Northern Ireland.

Britain has also been put on a negative watch in relation to "the risk to economic prospects, fiscal and external performance, and the role of sterling as a reserve currency, as well as risks to the constitutional and economic integrity of the UK if there is another referendum on Scottish independence."

Until Monday S&P was the only agency still maintaining the maximum investment rating on the United Kingdom.

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