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UK government warned about budget deficit

The UK government has today received a stark warning from ratings agency Fitch with a suggestion that the UK credit rating is the one most at risk amongst the top rated countries in the world. Again, the UK budget deficit is coming under scrutiny with expectations that the £175 billion forecast will prove to be conservative and the figure could well nudge towards the £200 billion barrier. So what does this mean for the UK economy?

The warning about the UK budget deficit has impacted upon the exchange rate with sterling down against the dollar and the euro after a brief period of respite. Even though Fitch is cautious it still believes that the UK outlook is "stable" at the moment and the ratings are unlikely to be reduced although there is growing uncertainty about the bulging debt of the UK government. However, on the upside, Fitch believes that whichever government is victorious in the next general election it will bring in significant cost cuts to turnaround the growing budget deficit and replenish the UK plc balance sheet.

Many people believe that the UK government is currently paying the price for overinvestment in the public sector in the "good years" and a lack of money put aside for the "bad years".

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