Moody's downgrades UK's credit rating

The agency says the outlook for public finances has "weakened significantly".

In its report the agency said: "Moody's expects weaker public finances going forward, partly linked to the economic slowdown underway but also reflecting the increasing political and social pressures to raise spending after seven years of spending cuts.

"Since 2015, the Government has been finding it increasingly difficult to implement the spending cuts that it has been targeting, in particular on welfare spending.

"More recently, the Government has yielded to pressure and raised spending in several areas, including for health and adult social care.

"It also agreed to above-budget pay increases for some public sector workers.

"While these additional expenditures will be funded out of current budgets, the pressure to continue to increase spending in the coming years is likely to remain high, in particular on health care and the public sector wage bill."

The credit ratings agency also said that pressure on public funds would be "exacerbated" by the "erosion of the UK's medium-term economic strength that is likely to result from the manner of its departure from the European Union."

Responding to the downgrade, a Downing Street spokesperson said Moody’s assessment was "outdated" as it came before British Prime Minister’s landmark speech on Brexit in Florence yesterday.

In her address, Theresa May laid out her plans for future relations between the EU and the UK and called for a two-year "implementation period" after Britain officially leaves the bloc in March 2019.

Britain would be bound by EU rules and regulations during this period.

A number of European leaders have since called on Britain to provide concrete proposals to back up her rhetoric.

Moody's has changed its outlook on the UK from negative to stable, meaning another downgrade is not imminent.