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Treasury hits back at Moody's downgrade of Britain's public finances

Isabelle Fraser
The Treasury said that Moody's comments were

The Treasury has hit back at Moody's downgrade of Britain's credit rating, arguing its assessments about Brexit are "outdated". 

Moody's said that Brexit would damage prospects for economic growth and complicate policymaking, putting the Government's plans to fix the public finances in question, with debt levels expected to rise.

But a Treasury spokesman said: “The assessments made about Brexit in this report are outdated. The prime minister has just set out an ambitious vision for the UK’s future relationship with the EU, making clear that both sides will benefit from a new and unique partnership.”

Prime Minister Theresa May delivering a speech on Brexit in Florence Credit: PA

He added: “We have made substantial progress in reducing the deficit while finding extra money for the NHS and social care at the same time. We are not complacent about the challenges ahead but we are optimistic about our bright future.”

The downgrade to Aa2, which is two notches below the triple A rating that Britain had for 35 years until 2013, was announced on the same day as Prime Minister Theresa May's speech on Brexit in Florence. However the decision was made on Tuesday, so did not consider the content of the speech.

The other ratings agencies, Fitch and S&P, both downgraded Britain's finances in the wake of the referendum last year. In the same announcement, Moody's also revised the UK's outlook to stable from negative, meaning a further downgrade is not imminent. 

Brexit | Key dates

The rating agency said that the decision to leave the EU single market and customs union would be "negative for the country's medium-term economic growth prospects." It added that it expected "weaker public finances going forward, partly linked to the economic slowdown under way but also reflecting the increasing political and social pressures to raise spending after seven years of spending cuts."

Moody's also said that the fact the Government did not have an overall majority in Parliament "further obscures the future direction of economic policy".