UK's triple-A rating threatened in warning over deficit cuts

My Account
Logout

Create an Evening Standard Account

Use your social network

Save time by using your existing account to sign in to Evening Standard

We'll never share your information or post anything to your account without your permission

Welcome! Sign in here

Use your social network

Save time by using your existing account to sign in to Evening Standard

We'll never share your information or post anything to your account without your permission

Forgot your password ?

Registration

* indicates fields that are mandatory

Email *

Password *

Confirm Password *

First name *

Surname *

Postcode *

Country *

Mobile phone number

Username *

Gender *

Year of birth *

When you sign up...

You will have access to all our online competitions, discounted offers and can post comments on our site.

You will also receive The Weekender newsletter sent every Thursday - it’s full of fantastic offers and ideas for the weekend. You can update your email preferences in your account page when you log in.

Other newsletters and emails

Homes & Property Newsletter - Yes I want to receive the weekly email with all the latest news on property in the capital

Occasionally we would also like to send you relevant emails detailing specific offers either from ourselves or carefully selected partners. If you would prefer not to receive these then please tick the appropriate boxes below. We will never pass on your details.

I do not want to receive additional offers and information from the Evening Standard

I do not want to receive additional offers and information sent by Evening Standard on behalf of carefully selected partners

Terms and Conditions

* I have read, understood and agree to be bound by the terms and conditions of Evening Standard

Registration

Mail Sent for Registration Confirmation.

A confirmation email has been sent. Please activate your account by clicking on the activation link sent in your mail box.

Fitch said the huge size of the deficit projected for next year - forecast at £163 billion in Labour's April Budget - was "striking" in contrast with the increased belt-tightening efforts of other European nations.

The warning dented the pound against the dollar by 1%, falling to $1.437, and came after Prime Minister David Cameron said "painful" spending cuts would affect the lifestyles of everyone in Britain.

"The scale of the UK's fiscal challenge is formidable and warrants a strong medium-term consolidation strategy - including a faster pace of deficit reduction than set out in the April 2010 Budget," Fitch said.

It warned that the sovereign debt crisis engulfing Greece - as well as concerns over Spain and Portugal - outlined the need for more credible recovery plans and hinted at the loss of the UK's triple-A rating unless further action was taken.

Spain, Portugal and Italy have announced additional tightening measures amounting to between 1% and 2% of GDP by 2011 in response to increasing pressure from markets, leaving the UK potentially vulnerable.

"There is a risk that the UK's existing deficit-cutting targets begin to look distinctly weak compared with those of its high-grade peers," the ratings agency said.

The deficit will also remain much higher if the newly-formed Office for Budget Responsibility lowers growth forecasts for next year - which were set by the Treasury in April at an optimistic 3.25%.

A downgraded UK growth forecast will ripple through the public finances, impacting tax revenues and pushing up spending, Fitch said, and warned that the deficit could be 2% of GDP higher than current predictions by 2015 if growth is 1% lower than forecast next year.

A Treasury spokesman said: "Fitch's report makes the case clearly for an acceleration of deficit reduction, particularly in light of events in the euro-area sovereign debt market in recent months.

"The Government agrees and that is why it is committed to significantly accelerating the reduction of the structural deficit."