Thursday, May 21, 2009

Daniel Hannan was correct, UK credit rating suffers

May 21 (Bloomberg) -- Britain may lose its top-level credit rating at Standard & Poor’s for the first time as the government’s finances deteriorate amid the worst recession since World War II.

The outlook was lowered to “negative” from “stable” because of the nation’s increasing “debt burden,” S&P said in a statement today. The pound fell the most in almost a month against the dollar. Stocks and bonds slid, and the cost of insuring debt against default rose.

Britain would become the fifth western European Union nation to lose its rating because of the economic slump, following Ireland, Greece, Portugal and Spain. The U.K. plans to sell a record 220 billion pounds ($343 billion) of bonds in the fiscal year through March 2010 as the recession cuts revenue and forces the government to raise spending.

“We have revised the outlook on the U.K. to negative due to our view that, even assuming additional fiscal tightening, the net general government debt burden could approach 100 percent of gross domestic product and remain near that level in the medium term,” S&P analysts led by David Beers in London, said in a report today.