If the United Kingdom (UK) were to departure from the European Union (EU) without a deal, that would be "strongly credit negative" for the UK, Moody’s Investor Services said on Thursday, as reported by Reuters.
Key takeaways
"The UK's credit profile reflects significant economic strength, robust institutions and low financing risks."
"Coronavirus outbreak will drive a significant increase in the UK's government debt."
"Medium-term growth outlook depends on the future trading relationship with the EU."
"The UK faces important credit challenges several of which pre-date coronavirus outbreak."
"Other credit challenges the UK faces include diminished predictability & coherence of policymaking following Brexit referendum."
"Structurally weaker economic fundamentals would undermine the UK's credit profile."
"Fall in trade with EU following the UK's exit from single market later this year will also weaken the economy's medium-term growth prospects."
"Challenges the UK faces include pressure to raise spending after years of austerity that would limit any improvement in public finances."
"The UK's economic contraction, government's fiscal response to coronavirus outbreak to have a significant impact on the deficit, public debt ratio this year."
"Inability to offset benefits lost due to a narrow EU deal with trade deals elsewhere would also be credit negative."
Market reaction
The GBP/USD pair largely ignored these remarks and was last seen posting small daily gains at 1.2742.
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