UK Could Lose AAA Rating in 2013

UK Could Lose AAA Rating in 2013.

Credit Agency Moody’s has issued a stark warning that the UK could lose its AAA rating in 2013.

This follows news that the Bank of England has cut its UK growth forecast for 2013 be nearly half to 1%.  Add this to the Eurozone returning to recession, things look bleak for UK trade.

Austerity measures in the UK are having an effect but a stagnant economy, stagnant property market and slowing global trade will put pressure on the UK.

Our view
If the UK loses its AAA rating, it will become more expensive for the UK to borrow money.  In short, UK gilt yields will rise.  What does this mean to UK investors?

1. Annuities – gilt yields will rise meaning that annuity rates will rise.  This will mean slightly bigger pensions for those retiring next year.
2. Fixed Interest Funds – gilt yields will rise meaning that capital values for Gilts and Corporate bonds will fall.  If you have a gilt or fixed interest fund, expect its value to fall and you should consider locking in your profits now.

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