Blog: Britain on the brink
Olly Wehring | 21 May 2009
The UK is within a whisker of Chancellor Alistair Darling's eyebrow hair of losing its AAA credit rating, a move that could seriously jeopardise the country's future economic health.
Investment house Standard & Poor's today (21 May) downgraded the UK economy from stable to negative. It warned that the country's bulging budget deficit means that there is now a one-in-three chance of the UK losing its premier AAA credit rating.
If that happens, and it hasn't since 1978, the UK government will find that it becomes more expensive to borrow money. In turn, that would jeopardise the current Government's policy of spending its way out of recession.
Standard & Poor's warned that Government spending must be reined in. The new Government to emerge from next year's general election, whoever that may be, will almost certainly have to make tough cuts - and not just to MPs expenses.
Chancellor Darling said in his Budget speech last month that UK debt is set to reach 59% of gross domestic product this year and is expected to rise to 79% by 2013/14.
Considering that the rate was less than 40% only a year or so ago, this is pretty seismic stuff and is largely what prompted today's warning from Standard & Poor's.
Out of recession by Christmas? Perhaps, but the road out looks like a long one.
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