Boris Johnson's exit adds to strains on UK economy, ratings agencies say - Reuters UK

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Drone view of the financial district in London, Britain July 3, 2022. REUTERS/Yann Tessier

LONDON, July 8 (Reuters) - The turbulent resignation of British Prime Minister Boris Johnson this week will add to growing pressures on the UK economy, the world's top credit rating firms S&P Global and Moody's said.

Moody's Vice President Evan Wohlman said a potentially lengthy leadership contest within the UK's ruling Conservative party now read more would slow efforts to tackle mounting cost of living pressures and stagflation concerns.

"We expect the next government will face a persistently high government debt burden given political pressure for looser fiscal policy," Wohlman said.

Moody's currently has a 'stable' outlook on its Aa3 UK rating as does S&P although its grade is one notch higher at AA.

S&P said the next UK prime minister would have to deal with a number of challenges, especially with a technical recession now forecast in the second half of this year and near 10% inflation eating into peoples finances.

The UK's independent fiscal body, The Office for Budget Responsibility, has projected that real disposable incomes will fall by 2.2% this financial year (2022/2023), the largest annual decline since records began.

General government debt had been projected to fall to 94% of GDP by 2025 from 96% at the end of 2021, although the current pressures are now raising doubts about the prospect.

"The (UK's) ratings could come under pressure if economic growth is significantly weaker than we anticipate, challenging fiscal consolidation," S&P said.

Reporting by Marc Jones, Editing by Louise Heavens

Our Standards: The Thomson Reuters Trust Principles.

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