Brexit to prompt UK downgrade by all ratings agencies


Ratings agencies have unanimously said Britain’s sovereign rating faces a downgrade, while in corporates financials, carmakers, manufacturing and food production are areas for concern.

S&P was the only ratings agency to hold the top-notch AAA rating for the UK, but today chief ratings officer Moritz Kraemer said that rating was “untenable”. Moodys and Fitch Ratings downgraded Britain before the referendum began.

However, those agencies too have warned of further ratings downgrades with Fitch stating it would “review the sovereign rating shortly”.

“Substantial” new barriers to trading goods and services would adversely impact automotives, manufacturing and food production, Moodys said in a statement, adding the lasting impact of Brexit would depend on the new trade model yet to be negotiated between the UK and the EU.

S&P said UK’s financial services would suffer as they faced a competitive disadvantage compared with other financial centres.

It said banks would not get an automatic downgrade, but were likely to be impacted by “adverse consequences for economic activity, new business volumes, asset prices, and demand for UK-related debt”.

Fitch said Brexit would be “credit negative for most sectors in the UK”.

S&P also warned volatility may interrupt wholesale debt issuance and the value of financial assets in the near term.

“A curtailment in corporate investment in the UK over the medium term is a key concern as that would likely weaken innovation, slow improvements in operating efficiency and, ultimately, impair the competitiveness of British manufacturing and service industries versus peers abroad,” the S&P says.

Brexit would be less of a concern for EU-based issuers, Moodys says.