The UK credit rating was downgraded by Moody’s late on Friday evening as analysts at the agency warned of scarring to the country’s economy from the coronavirus.
The rating agency cut its grade one notch to Aa3, equivalent to a double-A minus rating from rival S&P Global, and said its outlook was “stable”.
Moody’s said it believed growth would be “meaningfully weaker” than it had previously believed and that the country’s economy had been struggling even before the pandemic reached Britain.
The coronavirus crisis is expected to weigh more heavily 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 pointed to what it called “the weakening in the UKʼs institutions and governance”.
“While still high, the quality of the UKʼs legislative and executive institutions has diminished in recent years,” it said.
“The coronavirus-induced shock has brought new and considerable pressures on the UK economy,” Sarah Carlson, an analyst with Moody’s, said. “Despite the projected recovery, we estimate a sharper peak-to-trough contraction for the UK than for any other G-20 economy.”