Could the UK lose its Triple-A credit rating?
Despite the fact there is still significant concern about the state of the UK national finances, very few people believe that the UK's AAA credit rating is seriously at risk. However, Neil Woodford, one of the U.K.'s leading fund managers and head of investment at Invesco Perpetual, believes that there is a "high probability" of Britain losing its AAA credit rating. So is this a real possibility?
Mr Woodford believes that the UK of today is comparable to that of the 1970s when the government was forced to go cap in hand to the International Monetary Fund for funds to bail out the country. While many people do not subscribe to this particular train of thought regarding the UK economy, there is no doubt that the government needs to put forward an acceptable and a detailed plan to reduce the massive budget deficit.
If the UK was to lose its top tier credit rating this would see a collapse in the pound, investors run for the hills, a further increase in national debt and an increase in the rate of interest the UK government would need to pay. While this is most certainly a doomsday scenario, and again not one which many people subscribe to, it cannot be ruled out completely.
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