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Moody's: New UK tax, spending strategy could weigh on credit profile


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Moody's: New UK tax, spending strategy could weigh on credit profile

The U.K. government's tax and expenditure plans under the premiership of Boris Johnson and the growing risk of a no-deal Brexit could further weaken the country's sovereign credit profile, Moody's said in an Aug. 1 report.

The fiscal and economic strategy plans come amid challenging growth and debt conditions, Moody's Senior Vice President Sarah Carlson said. But she noted the negative fiscal impact of these promises is difficult to estimate at this point.

"However, taken at face value, it seems likely that the overall fiscal impact would be at least 1.5% of GDP, possibly more," Carlson added.

The rating agency previously warned that Johnson's election as Conservative Party leader and U.K.'s prime minister has increased the risk that the nation will crash out of the EU without a deal. This will further undermine the U.K.'s worsening growth prospects, Moody's wrote Aug. 1.

"Putting these together, the coming weeks should offer more insight into the extent to which the Brexit period will leave the U.K. economically, institutionally and fiscally weaker, and more exposed to shocks, than it was when the Aa2 rating was assigned in 2017," according to the report.