Moody's maintains AAA rating for UK

21 September 2010

Credit ratings agency Moody's has urged the coalition government in the UK to continue with its austerity program if it wants the country to escape a potential downgrade.

It has maintained Britain's AAA status on the grounds that public finances will be on their way to good health by 2014, the costs of restructuring the banks will be minimal and there will be moderate economic growth in the medium term.

But Moody's warned that the UK faces some serious challenges following the damage done to the state's balance sheet by the global financial crisis.

Kenneth Orchard, Moody's lead analyst for the UK, said: "Private sector deleveraging, the uncertain state of the financial sector and slower growth in the UK's main trading partners are not conducive to allowing GDP growth to return to its pre-crisis trend rate."

According to a recent estimate by JPMorgan Chase, the government is paying around £3.2 billion ($4.99 billion) a year in interest on the debts incurred by the state bailout of Lloyds and Royal Bank of Scotland, reported Bloomberg.

By Tony Aynsley

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