Rating Agency S&P has downgraded the UK rating outlook after the country's plan of tax cuts. Earlier, the country's credit rating was AA and was dubbed as 'stable.' After the downgrade of the outlook, the rating of the UK's sovereign debt is now termed as 'negative.' This comes after news of the UK's prime minister's plans to cut down on taxes.
This has raised fears that the UK debt will rise as the government is not comprising on its public spending. On top of that, the country will be earning less money after the proposed tax cuts.
The UK's finance minister has announced tax cuts of around $50 billion (45 billion pounds) - A portion of this amount will also be used to provide household subsidies on a temporary basis and will also be used for business energy bills.
Recently, the Bank of England also launched a new program for purchasing bonds... This was done to stabilize the markets and bring some calm to the investors.
S&P Says British Debt Is Rising
S&P (rating agency) announced that the public debt in the UK is rising in an upward trend. Earlier, it was expected to actually go lower due to the forecast of 2023's GDP numbers.
The S&P stated that their forecast for the UK is subject to multiple fiscal risks... For starters, it is entirely possible that the economic growth of the UK will get weaker due to the poor economic environment. Another risk factor is the increased borrowing cost of the UK government due to the tighter monetary policy and the market forces.
The experts are also forecasting that a technical recession in the UK is also entirely possible. For 2023, the forecast for the GDP is around -0.5%, which shows the worsening economic conditions.
But if the UK's GDP actually turns positive in 2023 instead of shrinking, then it will be good news for the UK equities and other financial markets.