Moody's downgrades United Kingdom

Moody's Investors Service said it downgraded the domestic- and foreign-currency government bond ratings of the United Kingdom by one notch to Aa1 from Aaa.

The outlook is now stable.

Moody's said the key interrelated drivers of the action are:

• The continuing weakness in the UK's medium-term growth outlook, with a period of sluggish growth which Moody's now expects will extend into the second half of the decade;

• The challenges that subdued medium-term growth prospects pose to the government's fiscal consolidation program, which will now extend well into the next parliament; and

• As a consequence of the UK's high and rising debt burden, a deterioration in the shock-absorption capacity of the government's balance sheet, which is unlikely to reverse before 2016.

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