UK AAA Rating Another Risk Warning

UK AAA Rating Another Risk Warning.

Credit ratings agency, Standard & Poors has followed fellow credit agencies Fitch and Moody’s to put the UK on a negative outlook for its AAA rating.

What does it mean? It means that credit rating agencies feel that Britain is in a less financially strong position to meet its debts than it was.

Why? They believe that the impact of the European slowdown will hit UK business and therefore the UK’s tax revenue.  In addition, it may be the fact that Chancellor George Osborne missed most of his growth targets and these have now been scaled back further for the next two years

Is this is bad thing? There are only three countries on the planet that have the coveted AAA rating for its ability to meet it debts from the World’s three leading credit rating agencies: Canada, Germany and the UK.  Even the US and France have been downgraded by Standard & Poors.

How will it affect the UK if we lose the AAA?

It may affect the low rates that Britain can borrow money at.  In short, our government bonds (Gilts) may have to increase the yield i.e.  the return offered.  This has not happened in the USA or France so we cannot see rates increasing dramatically in the UK

Annuities: If Gilt yields rise, annuity rates may also rise slightly.

We suggest that any client invested in fixed interest stock, gilts and corporate bonds may wish to switch away and lock in profits in the New Year as a minor precaution.