The rating agency said it had “reassessed our view of the UK’s institutional assessment and now no longer consider it a strength in our assessment of the rating”. We expect the general government deficit to average 3.6% of GDP over the next three years, compared with 2.8% in our prior “Remain” base case.
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Both Moody’s and Fitch rate Britain at one notch below AAA.
Leave supporters largely dismissed warnings about the economic consequences as scaremongering, and were confident Britain would negotiate trade deals and immigration controls superior to those it already has.
Weaker economic growth will adversely affect tax revenue and the budget deficit and require the government to implement additional fiscal consolidation measures to prevent it missing its fiscal targets.
Currency markets were rocked in the aftermath of the Brexit vote Friday with the pound falling sharply and close to two trillion dollars wiped off equity markets since the decision.
The price of gold – a traditional safe haven during volatility – had its best day since 2009 rising 5 percent.
EasyJet also fell by 14%, following a statement saying it will take a £28 million hit following two months of turbulence, adding that Brexit would have a negative impact on the airline.
“Constitutional issues for the country as a whole” are also posed by the vote for “remain” in Scotland and Northern Ireland.
The risks facing Britain are increased by the “political upheaval” that has followed the vote with the resignation of Prime Minister David Cameron and a leadership crisis in the opposition Labour party.
German Chancellor Angela Merkel says that there can be “no informal talks before Britain gives its notice” to leave the EU. But this time other things are not equal at all.
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The economic outlook for the country looks bleak according to Fitch, who see GDP much lower in 2018 than previously thought, casting doubts now on any ideas that the transition period will mean only short term pain for the economy.
