Moody's warns of UK sovereign rating downgrade if Brexit leads to loss of access to EU single market

US-based ratings agency, Moody’s Investor Service in its latest report warned that UK could lose its current 'Aa1' rating if Brexit negotiations would lead to loss of access to EU single market.

UK's current 'Aa1' rating is the second-highest rating. Moody's downgraded UK's outlook on 24th June, in the immediate aftermath of the EU referendum. It believes the terms at which Britain can trade with the rest of Europe after Brexit are crucial to the country’s long-term prosperity.

Moody's said the scale of the impact of Brexit on UK's growth prospects will depend on the format of the UK's new trading relationship with the EU. The rating agency expects that the UK government's Autumn Statement, due on 23 November, will likely give significantly more clarity in this area.

The agency also expressed concern that the UK government might wilt under the pressure of exiting the European Union, leading investors to lose faith in Britain’s fiscal credibility.

"A second trigger for a downgrade would be if we were to conclude that the credibility of the UK's fiscal policy had been tarnished as a result of Brexit or other reasons," adds Moody's.