Ratings agency Moody’s has announced it has downgraded the UK’s credit outlook to negative after the EU referendum resulted in a win for Leave.
In a statement the agency warned the result meant “a prolonged period of uncertainty”.
The agency said: “Moody’s expects a negative impact on the economy unless the UK government manages to negotiate a trade deal that largely replicates its current access to the Single Market.
“However, at the moment there is substantial uncertainty over the type of trade agreement that could be achieved.”
It added: “In Moody’s view, the negative effect from lower economic growth will outweigh the fiscal savings from the UK no longer having to contribute to the EU budget.”
The agency also issued a stark warning on the implications for economic growth, highlighting the UK’s budget deficit: “The UK government has one of the largest budget deficits among advanced economies, and lower GDP growth will further complicate the implementation of the government’s multiyear fiscal consolidation plan,”.
The statement will increase pressure on the UK government to begin its withdrawal negotiations quickly with the European Commission. Yesterday EU President Jean Claude Juncker urged David Cameron not to delay the process of exit.
Mr Juncker said: “Britons decided yesterday that they want to leave the European Union, so it doesn’t make any sense to wait until October to try to negotiate the terms of their departure – I would like to get started immediately.”
The UK must first officially notify the EU of its desire to leave. From that moment a two year period of negotiations will begin. Agreement on the conditions of withdrawal requires the approval of at least 20 members with 65% of the population. If there is no agreement then negotiations can be extended if all other 27 members agree. If not then the UK will have to accept withdrawal conditions laid out by the other members.
A meeting of 27 EU leaders has been scheduled for Wednesday to discuss Brexit – but the UK Prime Minister has not been invited.
The timeframe for withdrawal will have implications for any future Scottish independence referendum. With Scotland facing forced expulsion from the EU despite voting to remain, First Minister Nicola Sturgeon has already signalled her intention to call an indyref2. The SNP leader described any attempt to force Scotland out of the EU as “democratically unacceptable”.
Should a second indyref become a reality, it is likely the Scottish Parliament would choose to hold a ballot whilst still a member of the European Union. On Friday the First Minister announced that legislation was already being drawn up that allow a second independence referendum to take place.
The leaders of Scottish Labour and the Scottish Conservatives have already expressed their opposition to a second independence referendum. Both Kezia Dugdale and Ruth Davidson have issued public statements insisting the vote in September 2014 should not be re-run and that forced expulsion from the EU is not sufficient justification for holding indyref2.
Ruth Davidson said: “The 1.6 million votes cast in this referendum in favour of remain do not wipe away the two million votes that we cast less than two years ago.”
Kezia Dugdale said: “Labour’s manifesto ruled out a second referendum in the lifetime of this parliament – we won’t be changing our minds any time soon.”
Independence supporters have though pointed out that one of the key planks of the 2014 No campaign was a pledge of continued EU membership. Unionists insisted that only a Yes vote would jeopardise Scotland’s EU membership.
On Saturday the Scottish government will hold a cabinet meeting to discuss how to respond to Thursday’s result which saw Scotland vote overwhelmingly to remain a part of the EU.Views: 2027