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The rating company has previously said the UK would risk a recession with a no-deal exit. On Tuesday, it said the UK’s Aa2 rating would “come under downward pressure” if the economic impact of Brexit is more severe than it currently expects, such as in a no-deal scenario.
“Such an outcome would be very disruptive to current UK-EU trading arrangements and have a material, negative impact on the UK economy and on the economies of certain EU member states,” Moody’s said in its annual credit analysis of the UK.
The agency added that no-deal has become a more likely scenario, in its eyes, due to the Conservative party’s poor performance in the European elections and Theresa May’s resignation.
Both contenders to become the next Tory leader and prime minister, Boris Johnson and Jeremy Hunt, have said they are prepared to lead the UK out of the EU without a deal.
Moody’s said that would likely weaken the pound, raise inflation and squeeze real wages over the two to three years following Brexit, weighing on consumer spending and depressing growth. [...]
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