By Marc Jones
LONDON (Reuters) – A no-deal Brexit would almost certainly mean Britain’s credit rating would be cut again early next year, rating agency Fitch warned on Monday.
Fitch’s top sovereign analyst, James McCormack, told Reuters that crashing out of the European Union next March without a transition deal was likely to send Britain into a recession.
While it could be mild one if the turmoil gets resolved quickly, a more pessimistic outcome was expected to see the British economy contract 0.6 percentage point for 2019 as a whole.
“Clearly the deficit would be going up more substantially in the deeper recession scenario and that would almost certainly reverse the course of the debt-to-GDP reduction and would almost certainly have a rating impact,” McCormack said.
Fitch has kept a ‘negative outlook’ – effectively a downgrade warning – on Britain’s rating since it cut it to AA from AA+ in the wake of the 2016 Brexit vote.
It had already stripped of its prized triple-A grade back in 2016 but is now on alert again as the fierce political opposition to British Prime Minister Theresa May’s Brexit transition plans raises the “no-deal” threat.
“I expect we would be in a position to make a call upon hard Brexit itself, since we would know the parameters of exit and then could take a view on the economic implications,” McCormack said.
(Reporting by Marc Jones; Editing by Angus MacSwan)