Ratings agency Fitch warned that it could cut Britain’s debt rating, as the potential of a no-deal Brexit looms ever larger.
The country’s departure from the European Union without a divorce agreement would create a risk of “substantial disruption to UK 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 26th, but Fitch said “developments in the country warrant such a deviation from the calendar.
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.
Prime Minister Theresa May once again met with European Commission President Jean-Claude Juncker in Brussels, but no major breakthroughs were to be found.
With less than six weeks until Brexit day, the chances that the UK could leave the EU without a deal are causing a great deal of worry to businesses, as it would be hugely disruptive to the economy.
“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.”