© Reuters. A view shows the skyline with St Paul’s Cathedral, The Shard skyscraper and construction cranes, as seen from Primrose Hill, London, Britain, February 10, 2024. REUTERS/Hollie Adams
By Marc Jones
LONDON (Reuters) – Rating agency Fitch fired a warning shot across Britain’s bows on Monday, urging the country’s government to keep a tight rein on spending at its upcoming budget or risk another downgrade.
Fitch has an AA- grade and a negative outlook – effectively a downgrade warning – on its UK rating and is awaiting the budget next month where the struggling Conservative government is flagging possible tax cuts ahead of an approaching election.
“We estimate that the UK general government deficit rose to 6% of GDP in 2023 from 4.7% of GDP in 2022 and above the 2.7% ‘AA’ category median,” Fitch said, adding that government debt of just over 100% of GDP now was “almost double” the median.
Focus for the budget will be on whether the government’s new policy measures – which will come against a backdrop of easing of inflation, financing costs and potentially net borrowing – help reduce Britain’s debt level.
“Policy choices are key to reducing UK fiscal uncertainty,” Fitch said, highlighting that its next planned review of its UK rating was a couple of weeks after the March 6 budget on March 22.
“Implementing the fiscal consolidation projected after the election would entail real cuts in unprotected spending that could be politically challenging,” Fitch said.