LONDON: Moody’s warned on Friday it might cut its rating on Britain’s sovereign debt again, saying that neither of the main political parties in next month’s election was likely to tackle high borrowing levels which Brexit had made even harder to fix.
In a toughly worded statement, Moody’s said the fissures in Britain’s society and politics exposed by its still-unresolved decision to leave the European Union would be long-lasting.
“It would be optimistic to assume that the previously cohesive, predictable approach to legislation and policymaking in the UK will return once Brexit is no longer a contentious issue, however that is achieved,” the ratings agency said.
Moody’s said Britain’s 1.8 trillion pounds ($2.30tr) of public debt – more than 80 per cent of annual economic output – risked rising again and the economy could be “more susceptible to shocks than previously assumed.”
Both of the main political parties have promised big spending increases ahead of next month’s election.
“In the current political climate, Moody’s sees no meaningful pressure for debt-reducing fiscal policies,” the ratings agency said.
Prime Minister Boris Johnson called the December 12 election in an attempt to break the deadlock over how, and even if, the country should leave the EU, more than three years after the Brexit referendum.
Moody’s said the “increasing inertia and, at times, paralysis that has characterised the Brexit-era policymaking process” showed how the UK’s institutional framework has diminished.
Even once Britain was out of the EU, uncertainty would remain because of the “significant challenges” of reaching a future trade deal with the bloc, it said.
Published in Dawn, November 10th, 2019