S&P strips UK of AAA rating

Last week’s vote threatens Britain’s constitutional and economic integrity, the ratings agency said.

Ratings agency S&P is the last of the big three rating firms to downgrade the UK. Picture: AFP Photo/Scott Heppell.

Standard & Poor’s Global Ratings stripped the UK of its pristine triple-A credit rating on Monday, following through on its warning that last week’s vote to leave the European Union threatens the country’s constitutional and economic integrity.

The firm, which cut the country’s ratings by two notches to double-A, also said the vote for “remain” in Scotland and Northern Ireland creates wider constitutional issues for the country as a whole. S&P’s ratings outlook is negative.

S&P was the last of the so-called Big Three rating firms to remove the UK’s triple-A rating. Its downgrade comes after rival firm Moody’s Investors Service lowered its outlook on the UK’s ratings to negative from stable on Friday, while affirming them at Aa1, the second highest available. Fitch Ratings has the UK at an equivalent double-A-plus.

S&P, for its part, said it believes the UK economy has been able to attract higher inflows of low-cost capital and skilled labour than it would have without EU membership and said the country’s EU membership, alongside London’s importance as a global financial centre, bolstered the sterling as a reserve currency.

S&P had warned Friday that it was reviewing the ratings and said it believed the vote to leave the EU would deter investment in the economy, decrease demand for sterling reserves and put the country’s financial services sector at a disadvantage with other financial centres.

The UK’s surprise decision to leave the EU has rattled stock, currency and debt markets around the world, while also leading to a political upheaval in the UK.

Dow Jones