S&P Global Ratings revised its credit outlook on the U.K. to stable from negative and Fitch Ratings removed the country from Rating Watch Negative following a general election that gave the ruling Conservative Party its greatest parliamentary majority since 1987.
The Conservatives' majority in the House of Commons means it is highly likely that the U.K. will leave the European Union with a withdrawal agreement by Jan. 31, 2020, significantly reducing the risk of a "disruptive" no-deal Brexit, the rating agencies said. The majority will also provide Prime Minister Boris Johnson's government with more room to engage with Brussels over the terms of their post-Brexit relationship, according to S&P Global Ratings.
Fitch assigned the U.K. a negative outlook, reflecting its view that uncertainty regarding the country's future relationship with the EU, including terms of trade and other areas, will persist for some time.
While Johnson insisted that he will not seek an extension to the 11-month Brexit transition period that begins once Britain exits the EU, S&P Global Ratings expects the U.K. government to ultimately request more time to hammer out the details of its future partnership with the bloc. Fitch, meanwhile, said the U.K.'s self-imposed transition deadline could leave it vulnerable to unfavorable terms.
S&P Global Ratings affirmed the U.K.'s long- and short-term sovereign credit ratings at AA/A-1+. Fitch affirmed the country's long- and short-term issuer default ratings at AA/F1+.
S&P Global Ratings also revised its outlook on the Bank of England's AA long-term issuer credit rating to stable from negative, while Fitch affirmed the central bank's long-term foreign-currency issuer default rating at AA and removed it from Rating Watch Negative.
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