Moody’s: Britain’s EU exit would affect credit rating

Credit rating agency Moody’s warns ‘Brexit’ might stall United Kingdom’s trade opportunities and put pressure on pound

Photo by: Reuters
Photo by: Reuters

Updated Jul 28, 2015

As the United Kingdom discusses an exit from the European Union (EU) with a referendum, credit rating agency Moody’s warned the rating of the country may be at risk. According to the agency’s annual report on the UK, leaving the EU would put it off from common market, thus threatening the country’s current rating, which is one notch below the top triple-A score.

In the report the agency emphasised that the EU takes 50 percent of UK’s goods and 35 percent of its services. While this accounts 12-13 percent of the gross domestic product (GDP), it also makes the EU Britain’s largest export market. Moody’s also warned the UK that a possible exit would hurt the country’s foreign direct investment, as it is the largest recipient of the EU.

UK’s Prime Minister David Cameron vowed to hold a referendum by 2017, however, in order to avoid a politically uncertain atmosphere with the French and German elections in 2017, there have been some talks of moving the in/out vote forward to 2016.

However, Moody’s argues that bringing the referendum forward to 2016 would be additionally negative for the UK. “A shorter time frame increases the risk that the UK government will not manage to secure the changes it is seeking,” says the agency, leaving not much time to negotiate reforms with policymakers in Brussels.

Meanwhile, Moody’s is optimistic regarding UK’s growth rates. The agency forecasts the country to grow by 2.7 percent this year and 2.4 percent in 2016.

TRTWorld and agencies