Standard & Poor’s revised Britain’s credit ratings outlook from negative to stable and has affirmed Britain’s AA-rating.
After last year’s mini budget, the ratings agency changed its outlook from positive to negative. It believed that Liz Truss’s plans to reduce taxes at that time would lead to debts continuing to rise.
S&P stated that the decision of the government to abandon the majority of the £45 billion in unfunded measures proposed by Kwasi Kwarteng’s mini-budget has bolstered fiscal outlooks for the country. The government’s energy subsidy scheme also saw a drop in cost after the prices dropped over the winter.
Ratings agency stated that recent UK economic performance was stronger, and near-term economic risks were reduced. The EY Item Club is a leading economic forecaster. Last week, they predicted that the UK would not enter a recession, but the growth would be modest this year.
S&P predicts that the economy will contract modestly by 0.5% this year. It said that medium-term growth would be below average historical levels.
After the mini-budget of September 23, the pound dropped to its lowest level in 37 years against the dollar. Borrowing costs also rose to the highest levels seen in over a decade. The government’s tax cuts and increased borrowing risks losing the trust of the financial markets.
After Jeremy Hunt became chancellor, and after reversing many of the market-unsettling measures, confidence was boosted. The Bank of England intervened because of the turmoil on bond markets.
S&P expects that the general government deficit will average 3.7 percent of GDP between 2023-2025, compared to the 5.5 percent projected in September.
The net general government debt will begin to decline from its high of 97.7% of GDP in 2023. In September, the public debt was on an upward trend.