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Standard & Poor's puts UK on negative watch

Renowned credit rating agency Standard & Poor's has put the UK credit rating on "negative watch" citing the challenges facing the UK coalition government and the need to implement recent announcements as soon as possible. While being on negative watch is unhelpful it is not totally surprising when you consider the state of the UK economy and the UK government finances. However, if George Osborne and David Cameron are able to deliver savings on a scale they have promised so far then ultimately there should be no problems for the UK credit rating. However, will it all be plain sailing?

No matter how upbeat the coalition government is regarding the UK budget deficit there is no doubt that challenges will lay ahead. We recently saw a reduction in forecast growth for the UK economy for 2010 and 2011 and if there are further downgrades this will impact upon government income and the government's financial position. As a consequence, the new coalition government is literally walking a tight rope hoping that the UK economy does not turn downwards and indeed consolidates and moves ahead in due course. Whether this will happen remains to be seen but it will not be a smooth ride from the depths of recession to the highs of the boom times.

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