Home » Currency Note » Currency Note » Currency Note GBP » GBP: no-deal Brexit could lead to a ratings downgrade

On a day when the European Council President saw fit to criticise Brexiters who could still see the UK crash out of the EU without a deal, the ratings agency S&P warned that the UK’s credit rating will come under pressure in the event of a no-deal Brexit. While their latest report said it still expects an orderly Brexit, it admitted that the risk of no deal is still high and it could yet downgrade some British companies.

The UK currently has an ‘AA’ credit rating, the third-highest, with a negative outlook. S&P said that ‘the detrimental effects of no-deal on the banking system’ could result in negative rating actions on UK banks. It estimates that approximately 20 companies – most of which are based in the UK – could face a ‘negative rating action’ if there is no deal.

Sterling reversed some of its recent losses against the dollar, although the moves were fairly muted. It did manage to climb higher against the euro though, which has come under pressure following some more disappointing economic data from Germany. Today is a busy one for the UK, with the Bank of England set to announce its latest interest rate decision. We will also see the Halifax house price index for January, but the focus will be on Theresa May’s trip to Brussels.

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