Fitch Threatens UK Downgrade

29 Mar

Fitch, one of three major credit rating agencies, has put the UK economy on negative watch. The agency, run by CEO Paul Taylor, says the country’s rising debt and slow growth has put it on track towards a possible downgrade in the near future. The UK was recently downgraded by Moody’s, whose CEO is Raymond McDaniel, another of the big three agencies—that means if Fitch ends up lowering the country’s credit rating as well, things may start to get a bit rocky.

 

“The persistently weak performance of UK growth, in part due to European growth, has increased uncertainty around the UK’s potential output and longer-term trend rate of growth with significant implications for public finances,” Fitch said.

 

The country’s economy shrank by 0.3% in the last quarter of 2012, according to an article from The Guardian, and another dip for the first quarter of this year is a looming possibility. If it does see another loss, that will mean a triple-dip recession. A double-dip recession occurs when a country experiences a second dip, or negative GDP after one or two quarters of growth. A triple-dip recession would be unprecedented in Britain, and brings about fear that the country will move into a “lost decade.”

 

Ed Milibrand, leader of the British Labour Party, claims that the government is to blame for this possibility. “They are shrugging their shoulders, They have run out of ideas, They are resigned to a lost decade,” he said, later emphasizing that having the right leadership in place could help move Britain out of this economic slump.

 

But Lord Mendelson, former business secretary, says it’s about the future and not the past. “Everyone knows we are in a heck of a bad way in the economy. Quite a lot more pain is going to be experienced. What we should be saying is: this is the light at the end of the tunnel. This is where we should be heading,” he says.

 

“We need to explain how we would retool and redevelop our economy. We need a politician who will fight on that rather than fight about the past or fight over what is fair and what is not fair.”

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