U.K. Keeps Second-Highest Grade at Fitch Amid Government Cuts

Britain was kept at the second-highest credit grade by Fitch Ratings after Chancellor of the Exchequer George Osborne reinforced his commitment to cut the government deficit and the economic recovery strengthened.

Britain’s AA+ rating was affirmed by Fitch, which cited “substantial” progress in fiscal consolidation and the improvement in the strength of the banking system. The ratings company kept a stable outlook. The U.K. lost its top rating at Fitch in April.

“The recovery of the U.K. economy has strengthened since our last review in April,” Fitch said in a statement in London today. “Nevertheless, the U.K.’s performance since the 2008 financial crisis continues to lag most of its rated peers.”

Fitch sees the economy growing 2.3 percent in 2014 and 2015 and unemployment falling below 7 percent by 2015. It forecasts that the budget deficit will decline to 6 percent of gross domestic product in the 2013-2014 fiscal year from 11 percent in 2009-2010.

Fitch predicted that government debt will peak at 94 percent of GDP in the fiscal year 2015-2016 and begin falling in the fiscal year starting 2017.

Investors have largely disregarded changes in sovereign ratings, reflecting a shift from reliance on ratings companies to a focus on in-house analysis.

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