London Daily

Focus on the big picture.
Saturday, Oct 03, 2026

Moody's: UK's economic outlook now 'negative', ratings agency says

Moody's: UK's economic outlook now 'negative', ratings agency says

The UK's economic outlook has been lowered to "negative" by ratings agency Moody's due to political instability and high inflation.
Moody's changed the UK's outlook - which is a marker of how likely it is to pay back debts - from "stable".

Rating agencies, in essence, rate a country on the strength of its economy.

Moody's along with another of the big credit rating agencies Standard & Poor's (S&P) maintained their assessments of the UK's credit rating.

Rating agencies give governments (or large companies) a score on how likely they are to pay back their debt.

The rating affects how much it costs governments to borrow money in the international financial markets. In theory, a high credit rating means a lower interest rate (and vice versa).

Each agency gives countries around the world a specific credit rating score. These range from a top mark of "AAA", which stands for "prime", down to the lowest reading of "D", which stands for "in default".

Moody's said there were "risks to the UK's debt affordability", but kept its rating of Aa3, the fourth-highest level on its scale.

Meanwhile, S&P maintained the UK's rating of AA - its third highest rating level - and maintained its previously-changed outlook from stable to negative.

The reports published on Friday do not mean the UK's credit rating has been downgraded, but a negative outlook indicates it could be downgraded at a later date. The other outlooks countries can be given are positive, or stable, and any outlook period typically lasts 12 to 18 months.

Moody's said there were two "drivers" behind its decision to change the UK's economic outlook.

It said the first was "the increased risk to the UK's credit profile from the heightened unpredictability in policymaking amid a volatile domestic political landscape".

Moody's said this challenged the UK's "ability to manage the shock arising from weaker growth prospects and high inflation".

The rating's agency said it viewed the government's mini-budget, the reversal of the majority of the policies in it, and the change in prime minister as a "continuing reflection of the weakening predictability of fiscal policymaking seen in previous years".

Moody's assessment comes after government borrowing costs rose sharply in the aftermath of the mini-budget in September when investors became spooked by the then chancellor Kwasi Kwarteng pledging huge tax cuts without saying how the government would pay for them.

The current chancellor, Jeremy Hunt, reversed the majority of the tax cuts from the mini-budget on Monday in attempt to calm the markets, but the resignation of Prime Minister Liz Truss means economic policies are on hold.

"The government's initial inability to deliver a credible policy response to address investor concerns around this unfunded stimulus further weakened the UK's policy credibility, which is unlikely to be fully restored by the subsequent decision to reverse most of the tax cuts," Moody's said.

Moody's said the second driver of its decision to change the outlook was the "heightened risks to the UK's debt affordability from likely higher borrowing and the risk of more persistent inflation".

A spokesman for the Treasury said global financial markets had been "subject to significant volatility in recent weeks".

"While no national government can eliminate this, we can give certainty about the sustainability of public finances in the UK," a statement added.

"The underlying fundamentals of the British economy remain strong, with the UK having the second lowest net debt to GDP ratio in the G7 and unemployment at its lowest level in almost 50 years."

The spokesman said the government was focused on "delivering economic stability and sustainable growth".

Government borrowing costs rose on Friday, while the pound sank as investors reacted to gloomy economic data amid the political turmoil.

The interest rate - or yield - on bonds due to be repaid in 30 years' time rose back above 4%, making government borrowing more expensive. They had hit 5.17% in the aftermath of the mini-budget.

Meanwhile, the yield on bonds due to be repaid in five years' time, which underpins the cost of new five-year fixed rate mortgages, rose to 4.09%.

The Treasury said the chancellor would set out how the government will get debt falling on 31 October, alongside a full forecast from the Office for Budget Responsibility on his economic policies.
Newsletter

Related Articles

0:00
0:00
Close
Church of England to Apologize for Role in Historical Forced Adoptions
UK Defence Ministry Investigates Historical Use of RAF Bases by Jeffrey Epstein
Scottish Housing Completions Fall to 11-Year Low
Welsh First Minister Calls for Expanded Devolution Settlement
UK Pledges £50 Million to Expand Domestic Military Drone Capabilities
UK Opens First Commercial Geothermal Plant in Cornwall
Green Party Wins Gorton and Denton By-Election as Labour Falls to Third
Prime Minister Andy Burnham Opens Review of UK-EU Relationship
UK Inflation Rises to 3.1%, Adding Pressure on Household Finances
UK Removes VAT From Domestic Electricity Bills to Ease Winter Energy Costs
Counterterrorism Police Arrest Sixth Suspect Over RAF Fairford Incident
UK Councils to Receive Sweeping Planning Powers to Ban New Vape and Betting Shops
Chancellor John Healey Faces Tax and Pension Scrutiny Ahead of Autumn Budget
Metropolitan Police Apologise for Accidental Disclosure in High-Profile Investigation
UK Universities Report Record International Enrolment as Housing Pressure Grows
UK Logistics Firms Monitor Rhine Disruption as Low Water Threatens European Supply Chains
UK Food Industry Warns Inflation Could Approach 7%
UK Introduces Vaping Duty and Mandatory Retail Stamps
Scotland Raises Property Taxes and Expands Child Payment in Annual Budget
Greggs Plans Four Factory Closures With 740 Jobs at Risk
OECD Raises UK 2026 Growth Forecast to 1.1%
UK Inflation Rises to 3.1% as Bank of England Faces Rate Debate
Andy Burnham Criticises Brexit and Says Rejoining EU Single Market Remains an Option
UK Imposes New Sanctions on Russian Military Networks and Propagandists
UK Launches Nationwide Early-Release Prison Scheme
Andy Burnham Says Security Services See Signs of Iranian Involvement in RAF Fairford Incident
Manchester City Found Guilty on Premier League Financial Charges After Independent Investigation
Scottish Court to Rule on Bid to Force No-Confidence Vote Against Aberdeen Council Co-Leader
UK Bans Extra Charges for Seating Children Under 12 Beside Accompanying Adults
UK Introduces Vaping Duty and New Licensing Requirements
Greggs to Close Four UK Factories and Cut 740 Jobs
Hundreds of Prisoners Released Early as England and Wales Prisons Reach 98% Capacity
UK Unveils New Russia Sanctions Targeting War Funding and Shadow Fleet
Burnham Says There Are Strong Indications of Iranian Involvement in RAF Fairford Security Breach
Prime Minister Andy Burnham Raises Prospect of Reviewing Britain's Post-Brexit EU Relationship
Markets Price in Bank of England Rate Increases as Inflation Rises to 3.1%
UK Borrowing Costs Climb Toward 5.5% as Global Bond Sell-Off Intensifies
UK-France One-In-One-Out Migration Agreement Expires as London Seeks Alternative Measures
Southwest England Faces Flood Alerts After Heavy Autumn Storms
UK Expands Funding for Rapid Electric Vehicle Charging Infrastructure
Welsh Government Approves Funding to Upgrade South Wales Transport
Northern Ireland Tensions Rise as Orange Order Rejects Drumcree Compromise
NHS Leaders Back Early Design of Proposed National Care Service
More Than One-Third of Regional UK Universities Face Financial Deficits
UK Current Account Deficit Narrows as Cross-Border Financial Flows Remain Strong
Bank of England and FCA Issue New Rules for Stablecoins and Digital Assets
MI5 Warns UK Universities Over Research Links With Chinese Institutions
UK Energy Price Cap Rises 4% as Electricity VAT Is Temporarily Suspended
Equity Calls for UK Personality Rights to Protect Performers From AI Replication
OpenAI Pauses Advanced Model Training Following Safety Concerns
×