UK's credit rating downgraded by Moody's as Brexit fears slow economic growth

The UK's credit rating has been downgraded as Brexit threatens to slow economic growth.

Moody's cut the country's long-term issuer rating and senior unsecured bond rating from Aa1 to Aa2 - leaving them two notches below the US agency's highest rating.

Last year, Britain's credit rating outlook was downgraded from "stable" to "negative".

Analysts said the outlook for the UK's public finances had "weakened significantly", with Brexit likely to put further pressure on the economy.

It also argued that the Government's plans to fix public finances were increasingly in question and debt levels were expected to rise.

It comes as Theresa May set out her vision for a two-year transition period with the European Union after Brexit.

"Moody's expects weaker public finances going forward, partly linked to the economic slowdown under way but also reflecting the increasing political and social pressures to raise spending after seven years of spending cuts," the agency said in a statement.

"Moody's believes that the UK government's decision to leave the EU single market and customs union as of March 29 2019 will be negative for the country's medium-term economic growth prospects."

Labour described the decision as a "hammer blow to the economic credibility" of the Conservatives.

Shadow chief secretary to the Treasury Peter Dowd said: “"For the second time under the Tories the UK’s credit rating has been downgraded, and on this occasion citing their lack of faith in the Chancellor to meet his own spending targets as a result of unfunded spending commitments such as the deal with the DUP."

Moody's also cut its rating for the Bank of England to Aa2 from Aa1, but revised the UK's outlook to stable from negative, meaning a further downgrade is not imminent.