The United Kingdom will keep its triple-A credit rating for now but remains at risk of a downgrade, Standard & Poor’s says.
S&P reaffirmed the U.K.’s gilded rating but kept its outlook negative. Monday’s announcement comes after a new government last month proposed budget cuts that one analyst deemed “eye-watering.”
S&P said it views the cuts as a “strong framework” for improving the nation’s finances. But it suggested the government proposal hinges on optimistic projections, and warned that actually putting the plans in place will not be easy.
“A number of large and politically challenging spending decisions are still to be made,” the rating agency said Monday. “There is still a material risk that the U.K.’s net general government debt burden may approach a level incompatible with the ‘AAA’ rating.”
The negative outlook doesn’t necessarily signal a coming downgrade, but it does means there is at least a one-in-three chance of one, S&P said.
“The negative outlook reflects the potential of a downgrade if the government does not implement its challenging fiscal consolidation program on the scale currently planned,” S&P said. “A slackening of that effort, in our view, could put the U.K.’s net general government debt burden on a trajectory that would be incompatible with a ‘AAA’ rating.”