The UK Chancellor George Osborne has welcomed Britain’s continuation of its AAA credit rating by an important agency that also backed ongoing deficit reduction measures. The UK economy fell by 0.7% forecast by analysts. Although part of this was due to extra bank holidays for the Queens Diamond Jubilee and record rain which kept people out of shops, it has sparked a fresh wave of criticism over the coalition handling of the economy and it is continuing focus on deficit reduction.

However S&P have still given its highest AAA rating for the country’s credit and has maintained the outlook for the UK economy as stable, this has relieved some of the pressure on the government.  S&P have said that they expect economic performance in the UK to improve in the second half of 2012 and to steadily strengthen afterwards.

Furthermore S&P gave its backing to the chancellor’s deficit reduction drive; they went as far to say that its affirmed rating was predicated on continuing fiscal consolidation and that a slowing of the programme could cause the agency to lower the ratings. 

S&P said “We believe that the U.K. economy’s capacity to absorb shocks has improved. Household savings have increased and large corporations have accumulated substantial cash holdings.”
“The stable outlook reflects our expectation that the government will continue to consolidate public finances, enabling net general government debt as a percentage of GDP to stabilize by 2014.”

“We could lower the ratings in particular if the pace and extent of fiscal consolidation slows beyond what we currently expect.”