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Brexit: S&P strips Britain of top AAA rating

Published:  28 June, 2016

Britain's economic status has been rocked following announcements from two top ratings agencies that they have stripped it of its top credit ratings.

The UK is has lost the markers which gave it top billing on the global economic stage as Standard & Poor's (S&P) announced it was downgrading it by two notches from AAA to AA.

Rival agency Fitch Ratings similarly downgraded Britain's ranking one notch from AA+ to AA.

S&P had been the only major agency to maintain an AAA rating for the UK.

S&P said the referendum result could lead to "a deterioration of the UK's economic performance, including its large financial services sector" adding: "In our opinion, this outcome is a seminal event, and will lead to a less predictable, stable, and effective policy framework in the UK.

"We have reassessed our view of the UK's institutional assessment and now no longer consider it a strength in our assessment of the rating."

This downgrading is the first time the S&P has chopped an AAA-rated sovereign credit rating by two notches in one move.

Before the vote, the United Kingdom was the world's fifth largest and Europe's third largest economy with a $2.99 trillion GDP.

Sterling tanked to a 31-year low against the US dollar yesterday (June 27) and stock markets fell for a second trading day since the referendum last Thursday.

In a statement, Fitch said: "Uncertainty following the referendum outcome will induce an abrupt slowdown in short-term GDP growth, as businesses defer investment and consider changes to the legal and regulatory environment."

S&P expressed concern that wide-margin votes to remain within the EU from Scotland and Northern Ireland will create wider constitutional issues for the country as a whole.

Fitch also said that Scottish independence would be negative for the UK's rating, as it would lead to a rise in the ratio of government debt/GDP, increase the size of the UK's external balance sheet and potentially generate uncertainty in the banking system, for example in the event of uncertainty over Scotland's currency arrangement.