Odds of United Kingdom Losing AAA Rating Just Went Up

By Jon C. Ogg Published Jun 12, 12:50PM EDT

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The odds of a U.K. downgrade just increased. Standard & Poor’s has changed its outlook for the credit ratings of the country. A release was issued mid-Friday that S&P has affirmed the AAA/A-1+ rating for the United Kingdom, but the ratings agency’s outlook was moved to Negative from Stable.

What stands out here is that this view is said to echo the prior downgrade of the United States back in 2011.

The heart of the decision was said upfront to be the government’s decision to hold a referendum on European Union membership by 2017. S&P is worried that economic policy making could become more exposed to party politics than what S&P had previously considered.

S&P warned that a possible departure from the EU by the United Kingdom also raises questions about the nation’s large twin deficits and high short-term external debt.

As a result, the AAA/A-1+ rating for the Bank of England was also affirmed, but the outlook was moved down to Negative from Stable.

The iShares MSCI United Kingdom (NYSEMKT: EWU) was already lower on the day. On last look, shares of this exchange traded fund (ETF) were down 0.7% at $19.11, against a 52-week range of $17.11 to $22.11. As far as how large the ETF is, it trades over 3.2 million shares on an average day, and the iShares website indicated that its total assets currently are $3.3 billion.

Anyhow, this is not a formal downgrade of the United Kingdom. It just sure sounds a lot like what the United States went through in recent years.

Wilbur Ross described losing a AAA rating better than anyone else ever has: “Having a Triple-A rating is a lot like virginity. It’s easy lose and very difficult to get back.”

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About the Author Jon C. Ogg →

Jon Ogg has been a financial news analyst since 1997. Mr. Ogg set up one of the first audio squawk box services for traders called TTN, which he sold in 2003. He has previously worked as a licensed broker to some of the top U.S. and E.U. financial institutions, managed capital, and has raised private capital at the seed and venture stage. He has lived in Copenhagen, Denmark, as well as New York and Chicago, and he now lives in Houston, Texas. Jon received a Bachelor of Business Administration in finance at University of Houston in 1992. www.247wallst.com.