The credit rating agency pointed out that the decision reflects not only restored policy predictability but also effective functioning of the UK’s institutions. It particularly lauded the UK government’s commitment to fiscal prudence, which Moody’s categorised as a governance consideration under its environmental, social, and governance (ESG) framework. Moody’s expects that the UK will continue to operate within its fiscal rules framework and gain credible oversight from the Office for Budget Responsibility (OBR), thereby adding credibility to its fiscal consolidation efforts.
Moody’s also noted the UK’s long-standing strong institutional framework has proven essential in steering policymaking more credibly than in October 2022. In addition, a more conciliatory approach towards European Union (EU) relations could help mitigate Brexit-related uncertainty and spur business investment, as per Moody’s.
Moody’s Investors Service has affirmed the UK’s long-term issuer and domestic-currency senior unsecured ratings at Aa3 and changed the outlook to stable.
The agency cited restored policy predictability and effective institutional functioning in the UK.
Concurrently, the Bank of England’s ratings for the country were also affirmed, with a stable outlook.
The affirmation of the UK’s Aa3 ratings captures Moody’s baseline view that the UK’s economic resilience is supported by a wealthy, competitive, and diversified economy. Government indebtedness is expected to remain stable at around 100 per cent of GDP, which Moody’s views as being in line with rating peers. Debt affordability is anticipated to improve in the coming years after a temporary inflation-related spike.
In concurrent actions, Moody’s also affirmed the Bank of England’s (BoE) Aa3 domestic and foreign-currency long-term issuer and foreign-currency senior unsecured bond ratings. The outlook for the BoE has also been changed to stable from negative. The ratings for the BoE align with those of the UK government due to its essential role in the government’s economic policy framework.
Moody’s concluded by noting that the UK’s local and foreign-currency country ceilings remain unchanged at Aaa. The ceilings are driven by the government’s relatively small footprint in the economy, a robust external position, and a diversified economy.
Fibre2Fashion News Desk (DP)
