S&P cuts UK rating outlook after government fiscal plan

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Finance minister Kwasi Kwarteng announced around 45 billion pounds of permanent, unfunded tax cuts on Sept. 23 in addition to costly temporary subsidies to household and business energy bills, sending sterling and gilt markets into a tailspin.

S&P – which ranks British government debt one notch higher than rivals Moody’s (NYSE:MCO) and Fitch – said it saw British public debt on an upward trajectory, in contrast to a previous forecast that it would fall as a share of gross domestic product from 2023.

“Our updated fiscal forecast is subject to additional risks, for instance, if the UK’s economic growth turns out weaker due to further deterioration of the economic environment, or if the government’s borrowing costs increase more than expected, driven by market forces and monetary policy tightening,” it added.

S&P also forecast Britain would enter a technical recession in the coming quarters and that its GDP would shrink by 0.5% in 2023.