ANKARA
International credit rating agency Moody’s has confirmed Britain's credit rating at Aa1, citing that Scotland's decision to remain part of the U.K. in Thursday's independence referendum has preserved the strengths of the country's institutions and financial system.
Moody’s decision to confirm the rating on Friday came after the results of the Scottish independence vote were announced, showing Scottish people had rejected independence with 55 percent opting to remain part of the United Kingdom and 45 percent voting "yes" to breaking the union, in one of the most important votes in modern British history.
In a statement released on its website, the agency said: “Moody's decision to affirm the U.K.'s rating follows the outcome of the referendum on Scottish independence, which maintains the 307-year-old union, thereby preserving the country's current institutional and fiscal framework.
“While the political process going forward will likely lead to further devolution of powers to Scotland(and possibly other parts of the UK as well) and some changes in the fiscal transfers, the rating agency does not anticipate that these will have a material impact on the quality of the UK's institutions, or its financial strength,” the agency said.
Moody's has said the U.K.'s bond rating is based on the agency’s four-factor methodology for assessing sovereign credit risk, focusing on economic, institutional and government fiscal strengths, and susceptibility to event risk.
The agency noted the U.K.'s economic strength to be "Very High", which reflects its large, diversified and highly competitive economy, especially in the services sector.
Moody's also praised the county’s "very high" institutional power, which it says is "driven by the country's robust institutional capacity and pragmatic policymaking as evidenced by its willingness and ability to take long-term austerity measures.”
“The U.K.'s debt refinancing risk is low relative to some other highly rated and indebted sovereigns, due to the long average maturity of its outstanding debt stock (around 15 years), its large domestic investor base, and its independent central bank which is willing and able to adopt accommodative monetary policies,” the statement said.
The agency added that it would consider changing the outlook on the UK's rating to positive, and ultimately upgrading the rating back to Aaa, in the event of much more rapid economic growth and debt-to-gross domestic products reduction than the rating agency currently anticipates.
Meanwhile, International credit ratings agency Fitch also said on Friday that Scotland's decision against national independence had no implication for Britain's sovereign rating.
Fitch said in a statement: "Scotland's small share of the overall U.K. economy, and the relatively conservative limits set on Scottish borrowing, mean that the fiscal risks posed by further Scottish devolution are not high in our opinion."
www.aa.com.tr/en
