UK Credit Rating Held Firm Amid Energy Price Pressures

The UK's sovereign credit rating has been maintained at AA- by Fitch, reflecting its 'high-income, large, diversified and flexible economy' and strong financial markets. This rating is just three notches below the top prime grade, making it easier for the country to access capital markets.

However, high energy prices are expected to curb economic growth, with real GDP forecast to be 0.9% this year and 1.2% in 2027, slower than previously projected. Tighter funding conditions and a weak labor market are also contributing factors.

Fitch notes that the UK's 'credible' macroeconomic policy framework is not expected to change significantly under Prime Minister Andy Burnham, with no major loosening of fiscal rules anticipated. The Bank of England has kept its key interest rate at 3.75%, warning that inflation would hit 4% in 2027.