UK to keep AAA credit rating

Standard and Poor’s (S&P) have confirmed that the UK will keep its AAA sovereign credit rating despite a drop back into recession.

The rating – which restricts the cost of borrowing – reflects a stable outlook for the UK economy. 

Official figures have shown that economic output had fallen by 0.7%, between April and June, causing fears that the much coveted AAA status could be revoked.  

However S&P’s annual report states that “despite recent weakness, the UK economy should begin to recover in the second half of 2012 and steadily strengthen, and we expect economic policy to continue focusing on closing the fiscal gap”.

S&P’s credits the UK’s monetary flexibility as its key credit strength, owing to the British pound sterling’s role as a global reserve currency.

The confirmation comes as a timely boost to under-fire Chancellor George Osborne following pressure from the Liberal Democrats and the International Monetary Fund to slow budget cuts.

The chancellor said that the reaffirmation of the rating was “a reminder that despite the economic problems we face, the world has confidence that we are dealing with them”.

He continued: “As S&P say, what would damage Britain’s creditworthiness would be relaxing our resolve to deal with our debts. We won’t do that.”

Ryan Fowler