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Moody’s downgraded the UK’s credit rating late on Friday night, as analysts at the agency warned of scars on the country’s economy from the coronavirus pandemic.
The rating agency lowered its grade one to Aa3, equivalent to a double A rating less from rival S&P Global, while adding that its outlook was “stable.”
Moody’s said it believed growth would be “significantly weaker” than it had previously believed and that the country’s economy had been struggling even before the pandemic hit Britain.
The coronavirus crisis is expected to weigh more on the UK economy than other large developed nations, given its heavy reliance on services that require human interaction, the credit rating agency added.
The agency also specifically noted what it called “the weakening of the UK’s institutions and governance.”
“While it remains high, the quality of the UK’s legislative and executive institutions has declined in recent years,” he said.
Pat McFadden, a spokesman for the Labor Treasury, said the downgrade was a damaging verdict on Boris Johnson and the administration of the Conservative UK Economic Party.
“It is notable that the weakening of UK institutions and governance has been pointed to as part of the reason for the downgrade,” he said. “The ideological attack on our institutions that is being waged since number 10 is now having a direct impact on the economy.
“The prime minister should focus on securing the Brexit deal he promised rather than exacerbating the damage in the coming months.”
The Treasury said that the coronavirus pandemic had had a significant impact on public finances, but that things would have been much worse “if we had not acted the way we did to protect millions of livelihoods.”
The Treasury said its priority was to protect jobs and businesses and that “over time and as the economy recovers, the government will take the necessary steps to ensure the long-term health of public finances.”
Sarah Carlson, an analyst at Moody’s, said the coronavirus-induced shock had put considerable new pressure on the UK economy.
“Despite the projected recovery, we estimate a more pronounced peak-to-low contraction for the UK than for any other G-20 economy,” he said.
