WASHINGTON (AFP) – Fitch upgraded its credit rating for United Kingdom (UK) government debt from “negative” to “stable” on Friday, citing easing economic policy risks, while reaffirming the country’s AA- rating.
The United States ratings agency’s decision will likely be well-received by British Prime Minister Rishi Sunak, whose Conservatives badly trail the main opposition Labour party in polls ahead of local elections in May.
Fitch said in a statement that economic policy risks had eased in the United Kingdom since it issued its “negative” outlook in October 2022, during the brief premiership of former Conservative prime minister Liz Truss.
The Truss government’s disastrous tax-slashing mini-budget sparked economic and political turmoil and led to her departure from the top job in British politics after just 49 days in office.
“We expect general government debt/gross domestic product (GDP) to be broadly stable from end-2025,” Fitch said, adding it expects the UK’s government deficit to fall from 5.8 per cent of GDP last year to 3.7 per cent in 2025.
Fitch also welcomed the recent fall in UK annual consumer inflation, which has plummeted from a peak of 11.2 per cent in October 2022 to 3.4 per cent in February this year.
While this marks significant progress, UK inflation nevertheless remains stuck above the Bank of England’s two-per-cent target.
“Inflation had decelerated markedly due to lower energy prices, but core and services inflation remains relatively high, partly reflecting a still tight labour market,” Fitch said.
