The UK’s deepening recession will cost the country its cherished triple-A credit rating, leading bond investors warned after output fell 0.7 percent in the three months through June.
Leading investors said that the foundering economy, which economists had projected would shrink 0.2 percent in the second quarter, was confounding George Osborne’s ambitious austerity program and is likely to spur Moody’s to strip the UK of its top rating.
Moody’s put the UK on negative outlook in February this year.
“The data are shocking and no amount of excuses about rainfall or the Queen’s Jubilee can explain away such weak growth,” said Alan Wilde of Baring Asset Management.
“Osborne’s personal ratings for economic competency are plummeting and the credit rating agencies will be deeply concerned by today’s report ... this may well hasten a downgrade .”
The chancellor admitted the country had “deep-rooted economic problems”, but maintained the coalition was “dealing with our debts at home and the debt crisis abroad.”
Bond investors have grown increasingly wary of the threat to the UK’s triple A rating as economic data has continued to weaken. The dismal second quarter data has markedly increased the chances of rating cuts in the future, they said.
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