Fitch warns of British debt downgrade on 'hard' Brexit risk
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Fitch warned that the consequences could be serious if no agreement is reached for Brexit.
PHOTO: REUTERS
NEW YORK (AFP) - Ratings agency Fitch warned on Wednesday (Feb 20) that it could cut Britain's debt rating, citing the economic hit from a potential no-deal Brexit.
The country's departure from the European Union without a divorce agreement would create a risk of "substantial disruption to British economic and trade prospects, at least in the near term," Fitch said.
Fitch put Britain's long-term debt on credit watch "negative" for a possible downgrade from the current "AA" rating.
The review date had been set for April 26, but Fitch said "developments in the country warrant such a deviation from the calendar".
The action came as Prime Minister Theresa May met European Commission President Jean-Claude Juncker in Brussels, a round that yielded no major breakthrough.
With less than six weeks until Brexit day on March 29, fears are rising that Britain could crash out of the EU without a deal, creating economic havoc.
Fitch said it still expects Britain will avoid a "no-deal" Brexit and economic growth will pick up, but warned the consequences could be serious if no agreement is reached.
"The impact of a 'no-deal' Brexit on growth is highly uncertain, but a recession on the scale of that seen in the UK in the early 1990s (when real GDP declined by 2 per cent over six quarters) would be a reasonable comparison for gauging the potential macroeconomic stress," Fitch said.
"At the same time, a fiscal and monetary policy response would follow a 'no-deal' Brexit, mitigating the negative impact on the macroeconomic outlook."
