Fitch Ratings raised its credit rating on British government debt from negative to stable, citing easing of economic policy risks, while reaffirming the country’s rating at ‘AA-‘.
The decision is likely to be welcomed by British Prime Minister Rishi Sunak, whose Conservative Party is trailing Labor in opinion polls ahead of local elections in May.
Fitch said in a statement that economic policy risks have eased in the UK since it issued its negative forecast in October 2022, during former Conservative Prime Minister Liz Truss’ short term.
The Truss government’s disastrous tax-cut mini-budget caused economic and political turmoil and led to her leaving her top job in British politics after just 49 days in office.
“We expect general government debt to GDP to be broadly stable from the end of 2025,” Fitch said, while it expects the UK’s public deficit to decline from 5.8% of GDP last year to 3.7% in 2025.
Fitch also welcomed the recent decline in annual inflation in the UK, which fell from a peak of 11.2% in October 2022 to 3.4% in February this year.
Although this represents significant progress, inflation is still above the Bank of England’s target of 2%.
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