Moody’s Says Brexit Would Affect UK’s Credit Rating

A vote to leave the EU could cut the UK’s credit rating, according to the ratings agency Moody’s, which has waded into the debate with a warning about rushing the referendum.

The agency, which rates UK government debt one notch below the top triple-A score, says holding a referendum on EU membership next year would cut the period of uncertainty but at the same time would allow less time to negotiate reforms with Brussels.

That in turn would raise the chance of a vote to leave the EU, a so-called Brexit, with possible consequences for the UK’s rating.

In Moody’s view, a shorter time frame increases the risk that the UK government will not manage to secure the changes that it is seeking, which in turn may negatively influence the government’s willingness to support remaining in the EU,” the agency says in an update on the UK.

While the outcome of the referendum remains uncertain, Moody’s believes that a withdrawal from the EU would have negative implications for the UK’s growth prospects and – in the absence of an alternative trade arrangement with the EU that at least partly replicates the current access to the EU’s single market – would likely put pressure on the UK’s sovereign rating.

via The Guardian

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza