Fitch lowers UK outlook to 'negative', confirms AAA rating

Fitch lowered Britain's long-term outlook Wednesday to negative from stable, while confirming its top-level AAA rating.

The ratings agency said the revision "reflects the very limited fiscal space to absorb further adverse economic shocks in light of such elevated debt levels and a potentially weaker than currently forecast economic recovery".

The change represented a more than 50 percent chance of a downgrade over the next two years, Fitch said, citing ongoing financial tensions in the eurozone.

"The easing of financial market tensions in the eurozone in recent months has diminished the risks to the UK, but in Fitch's opinion, the crisis is not resolved and could once more intensify," a statement said.

While British banks were relatively well placed to absorb shocks of future market turmoil and losses on eurozone exposures, an intensification of the eurozone crisis may impact on the government's ability to meet its deficit and debt reduction targets, said the agency.

Fitch said its confirmation of the AAA rating reflected progress made in reducing the government's structural budget deficit.

"The UK's 'AAA' rating is underpinned by a high-income, diversified and flexible economy as well as political and social stability," it said.

However, the deficit was second in size only to that of the US and indebtedness was "significantly above the 'AAA' median".

"Fitch judges the government's fiscal consolidation plans to be credible, reflecting the strong political commitment and institutional capacity," it said, adding the upcoming budget was expected to reaffirm the government's commitment to deficit reduction.

Triggers that could prompt a downgrade include fiscal easing resulting in government debt peaking later and higher than the current forecast of about 94 percent by 2014-15, as well as adverse shocks resulting in higher levels of government borrowing and debt than currently projected.

"In the absence of adverse shocks, Fitch does not expect to resolve the Negative Outlook until 2014," said the statement.

Fitch last formally reviewed Britain's sovereign ratings a year ago.

  • Driving a $900,000 Porsche 918 Spyder to the future 1 hour 9 minutes ago
    Driving a $900,000 Porsche 918 Spyder to the future

    It’s more than just its inherent speed, or the whooshing noise that fills the cabin like a school choir jamming with James Hetfield. It’s what it represents in an industry full of skeptics. It’s a portal into the future – a time capsule left by some mad scientist born decades too soon. It’s something that shouldn’t exist. And yet it does.

  • 919 reasons to love: Flickr photo of the day 2 hours 23 minutes ago
    919 reasons to love: Flickr photo of the day

    We've brought you the drive video of the $900,000 Porsche 918 Spyder -- an 887-hp hybrid supercar with two electric motors working in harmony with a big 4.6-liter V-8. But how about this? Porsche's hybrid Le Mans racer -- the 919 Hybrid, sent to us by Kevin Leech. Get on board with electrification, folks. Because it's taking over the world.

  • Watch a man drive his three-wheeled Mustang along a Texas highway 8 hours ago
    Watch a man drive his three-wheeled Mustang along a Texas highway

    Some things in life are hard to explain, like why a dentist insists on asking you questions when you clearly can't respond. Or why we call pants "a pair" even though it's just one. Or how about this puzzler: Why a person would drive their Mustang along a Texas highway despite it missing a wheel? Life is full of little mysteries, I guess.

  • Singaporeans slam NEA's $120 licence requirement for tissue sellers
    Singaporeans slam NEA's $120 licence requirement for tissue sellers

    Singaporeans on social media reacted angrily to news that tissue sellers at hawker centres and street corners are being required to pay for an annual licence.

  • Heartbreaking texts from students on sinking S. Korea ferry
    Heartbreaking texts from students on sinking S. Korea ferry

    Heart-wrenching messages of fear, love and despair, sent by high school students from a sinking South Korean ferry, added extra emotional weight Thursday to a tragedy that has stunned the nation. Nearly 300 people -- most of them students on a high school trip to a holiday island -- are still missing after the ferry capsized and sank on Wednesday morning. Mom, I love you," student Shin Young-Jin said in a text to his mother that was widely circulated in the South Korean media.

  • Indonesia’s armed forces chief says “no apology” for warship’s name
    Indonesia’s armed forces chief says “no apology” for warship’s name

    General Moeldoko, the head of Indonesia’s Armed Forces, has clarified that he had not apologised for the naming of a warship after two Indonesian marines who had been involved in the 1965 MacDonald House bombing in Singapore.