The UK’s credit rating could be downgraded. But what does it really mean, should you be worried about its effect on your money, and can Continuum help?
A credit rating is an opinion of the general creditworthiness of individuals, companies and countries. For individuals, a low credit rating, means higher borrowing costs because the borrower is deemed to carry a higher risk of default.
Individuals with a low credit score find credit cards and mortgages can be difficult to obtain as a result.
A sovereign credit rating is the credit rating of a sovereign entity, such as a national government. Obviously nations have no need of credit cards, but they do need to borrow. It works a little like an individual’s credit rating and takes into account political issues as well as economic conditions.
Credit ratings reflect the chance that the country will default on interest payments and repaying its debt.
The UK’s credit rating could be downgraded soon
The UK’s credit rating could be downgraded after international ratings agency Moody’s lowered its outlook for the economy. The agency changed the outlook on the UK’s current marker of how likely it is to pay back its debts from “stable” to “negative” as a result of the ongoing Brexit saga. It cites deep divisions within society and the political landscape which have affected the UK’s ability to make policy decisions. They believe that the predictability that has traditionally distinguished the UK has been eroded.
The move comes little more than a week after Prime Minister Boris Johnson’s call for a general election next month, in the hope of breaking the Brexit roadblock.
On the positive side, Moody’s has said it sees positives in the UK economy such as a broad range of economic activity, a sound monetary policy framework and a highly flexible labour market. The cut to the actual rating has not been made – although some sources suggest that it could imminent.
What does this mean?
To put this in context, Moody’s stripped Britain of its top-notch AAA rating in 2013, and downgraded the UK again in 2017 to Aa2, the third highest grade. Another downgrade could be important, because it can affect the amount that it costs the country to borrow money.
An inability to borrow money cheaply could put the brakes on government spending. There could be an effect on businesses supplying the government – and potentially then on the economy in general.
How will this affect you?
It may be prudent to keep a close watch on the UKs credit rating, as it could ultimately affect the performance of the UK economy.
At Continuum, we can help you keep up with the latest financial news with our weekly education mailer and our regular news and information updates. We can also help you to keep an eye on your portfolio with our Personal finance portal.
A diversified portfolio of holdings could be part of a sound investment strategy,
But our greatest strength comes from the skills of our team – and our personal service. With a Continuum financial adviser, you have an expert ready to help develop a strategy aiming to preserve and grow your wealth, whatever happens to the UK credit rating and economy.
Working with an independent investment expert could help you identify the markets and business sectors that might feel the effect of more costly borrowing and review your investments accordingly. It could help making sure your portfolio is suitably diversified, but would need to be reviewed to make sure that this is maintained.
Getting expert help with your investment and the results you need whatever the broader economy is doing can be easier with help from Continuum. Call us today to get our expertise working for you.
The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to suitable investment strategy, you should seek independent financial advice before embarking on any course of action.
The value of investments can fall as well as rise and you may get back less than you invested.
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