Moody's cuts UK's credit rating citing finances, Brexit

British Prime Minister Theresa May said she would seek a transition period of around two years after Brexit

The UK lost its remaining AAA rating (S&P) four days after Brexit vote - but this is the first ever time a major credit rating agency has cut the country to third rank.

But a Moody's official said the speech made no difference to the agency's gloomy long-term view for Britain's economy. And finally, most tellingly she said "we do not seek an unfair competitive advantage".

The "increasingly apparent challenges" of Brexit also dragged down the rating, with the firm saying it no longer expected a replacement free trade deal to be negotiated. The decision was part of the rating companies scheduled calendar of sovereign reviews.

May will be blamed if the United Kingdom economy is undermined by Brexit. "The low hanging fruit has been picked and the fat has been trimmed".

Moody's predicted "weaker public finances going forward" as the government boosts welfare spending after several years of cuts and British Prime Minister Theresa May's parliamentary coalition faces pressure to make good on promises to boost spending for Northern Ireland. "We are not complacent about the challenges ahead, but we are optimistic about our bright future", a Treasury spokesperson added.

May's ability to persist with austerity has been weakened since she lost the government's majority.

Moody's further said that pressure on public funds will be "exacerbated" because of the "erosion of the UK's medium-term economic strength that is likely to result from the manner of its departure from the European Union".

"It also agreed to above-budget pay increases for some public sector workers".

The UK's annual budget deficit has come down from about 10 per cent of economic output in 2010 in the aftermath of the financial crisis to 2.3 per cent.

The pound fell to a fresh low of $1.3451 on the rating cut before paring losses, settling around $1.3504 at the 5 p.m. close in NY. "It's hard to imagine the government being able to have any focus on anything else".

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