Fitch warns of risk to Britain’s top grade credit ratings

A second agency yesterday called into question Britain's top-grade credit rating after Moody's downgraded the outlook on government bonds to ''negative'', denoting a 30-per cent chance of losing its AAA credit rating within 18 months in february (See: UK warned of possible rating downgrade: Moody's).

In a ratings assessment, Fitch said that Britain still had a higher budget deficit and debt than most other triple A-rated bonds and was in the same position as France and the US, which also still had a top rating with a negative outlook.

According to Fitch, the negative outlook indicated a ''slightly greater than 50 per cent chance of a downgrade over a two-year horizon'', adding that the UK's triple A status would not get the all-clear until 2014 and then too, only in the event the performance of the economy went on lines of the forecasts.

Analysts say the downgrade to negative outlook by a second rating agency would only come as an unwelcome distraction ahead of the budget next week as an identical downgrade by Moody's last month had barely elicited any response from gilt markets.

Chancellor to the exchequer, George Osborne, who is in the US along with the prime minister put on a brave front after having had a few hours notice of Fitch's decision. He said a week from the budget, it was a  reminder of why it was essential Britain stuck to its plans to deal with its debts.

He added, as Fitch itself said, the reason the UK retaining its triple A rating was because of 'the progress made in reducing the government's structural budget deficit and the credibility of the fiscal consolidation effort'.''

(Also see: Fitch downgrades Belgium, Cyprus, Italy, Slovenia and Spain)