Britain requires a “sustained” effort to keep its top credit rating, even after the government announced the steepest cuts in spending in a generation, said Moritz Kraemer, head of sovereign ratings for Europe, Middle East and Africa at Standard & Poor’s.
While the U.K. budget is an “important event,” the country’s credit rating cannot be maintained by “flicking a switch,” Kraemer said today at “The Sovereign Debt Briefing” in London hosted by Bloomberg Link.
The ratings company put the U.K. on a negative outlook in May 2009, saying Britain had a one-in-three chance of losing the top rating, which it has never lost since the rank was first assigned in 1978. The U.K. is rated AAA with a stable outlook at Moody’s Investors Service and Fitch Ratings.
U.K. Chancellor of the Exchequer George Osborne said on June 22 the government will impose a levy on banks and raise the sales tax as it attempts to reduce the Group of 20 nations’ biggest budget deficit and retain the AAA credit rating without stifling an economic recovery.
“We’ve only seen the budget coming out,” Kraemer said in an earlier Bloomberg Television interview. “This budget is clearly a very austere budget. At the end of the day, it’s a question of political will. It’s a question to what extent the government will be willing to push these things through.”
Moody’s and Fitch have already endorsed the June 22 budget, in which Osborne announced the deepest spending cuts in a generation, a bank levy and an increase in value-added tax. Moody’s said the plan is “supportive” of an Aaa rating, while Fitch said it ensured Britain would maintain its AAA grade.