Fitch credit rating agency has downgraded the UK from
AAA to AA+ after noticing trends of a weakening economy and fiscal outlook. Opposition
states that “This is another humiliating blow to a prime minister and
chancellor who said keeping our AAA rating was the number one test of their
economic and political credibility” (Ed Balls, Labour’s shadow chancellor and previous
(IMF) January forecast of 1% growth was slashed to 0.7% projected growth in
2013. This fall in economic outlook, however, is disputed by some who say that
they are signs of a slowly recovering economy. With the current plan, Britain
has demonstrated flexibility and increased its credibility in the international
setting, allowing it to borrow at a very low interest rate, which should
increase investment and heal the economy. SO far, it is too early to tell is
the current recovery plan is working, but time to consider a different approach
for faster economic growth might be needed in the near future.
This downgrade in rating is an absolute blow to the economy. This detracts investors in a major way. This is then paired with an extremely low growth rate. Who would want to invest money into a country with a rapidly declining growth rate and a downgraded rating. I think we could see the U.K. go into a recession in the months to come. The UK needs to find a way to raise capital despite the adversity they are facing. They also need to figure out a way to get their AAA rating back.
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