Shortly after the International Monetary Fund said the referendum could hurt Britain’s growth prospects, Standard & Poor’s said it was keeping its outlook for Britain’s top-notch rating at negative, while Fitch affirmed a rating that was one notch weaker.
S&P reiterated its decision in June to put the country on notice that it faced a one-in-three chance of a downgrade in the next two years, and Fitch said a vote to leave would be “moderately negative” and could trigger a move by Scotland to leave the United Kingdom.
S&P challenged one of the main arguments of supporters of a British exit from the EU, saying immigration had been positive overall for the economy over the past decade.
It repeated its view that the referendum represented a risk to Britain’s large financial services sector, its exports, and the wider economy. If Britain quit the EU, it could jeopardise its ability to fund a large deficit in its balance of payments.
“In a worst-case scenario, a Brexit could also harm the sterling’s role as a global reserve currency, removing what has been a significant support for our ‘AAA’ rating on the UK since the start of the global financial crisis,” it said.
S&P said it expected the Government would reach a compromise with the rest of the EU on reforms of the bloc in the first half of next year and both agencies said most voters in Britain would reject a so-called ‘Brexit’ in the referendum.
But S&P noted that the ‘leave’ campaign was better funded and organised than the ‘remain’ campaign, raising the risk of a vote to leave the EU. It added that plans to devolve powers could distract from fixing fundamental problems in the economy such as a housing shortage which would hurt Britain’s competitiveness.