One of the world’s foremost ratings agencies, Moody’s, has today warned that Britain will have its credit rating cut should the government fail to secure access to “core elements” of the EU’s single market. The UK is currently rated Aa1 – the second-highest rating. Moody’s already downgraded its outlook on the UK to “negative” from “stable” on the day after the EU referendum.
Moody’s statement said: “The UK’s Aa1 sovereign rating would be downgraded if the UK’s loss of access to the European Single Market following Brexit were to materially weaken medium-term growth and if the credibility of UK fiscal policy were to be undermined…”.
This warning highlights the economic significance of the bloc’s internal market in the upcoming Brexit negotiations, which the British Prime Minister, Theresa May, has said she will trigger by the end of March 2017. Kathrin Muehlbronner, senior vice president at Moody’s has said that: “The closer the UK’s new trade relationship with the EU resembles the current privileged access, the more limited the economic impact of Brexit will be for the UK”.
Senior EU officials and leaders have all argued that Britain cannot “have its cake and eat it”, by remaining a member of the single market if it does not accept the free movement of people – which is one of the four protected freedoms underpinned by the EU’s treaties.