- The uncertainty over the outcome of the forthcoming general elections in the United Kingdom was not affecting the country's credit profile, says Moody's Investors Service in a report published on Thursday.
In contrast, the rating agency noted that an increased likelihood of the UK leaving the EU could result in negative rating pressures over the medium-term, said Moody's report, entitled "UK Elections: Risk of Exit from EU is the Main Credit Issue.
According to Moody's, neither a period of political uncertainty following the elections nor the composition of the next government would likely affect the UK's credit profile.
The rating agency noted that all major parties were committed to further fiscal consolidation, even if the approach and pace differ to some extent.
Moody's also pointed to the UK's strong and stable institutions, which should ensure a smooth running of government during any interim period.
The potential transfer of fiscal responsibilities to Scotland and other sub-national governments would not pose a significant risk to the UK government's fiscal strength, said Moody's.
The rating agency notes that the election outcome would provide greater visibility on whether a referendum on the UK's membership in the European Union would be held.
"While it remained unclear whether it would indeed lead to an exit, if the likelihood of the UK leaving the EU are to increase, Moody's would analyze the impact on the UK's growth prospects" the rating agency said, reminding that the EU accounts for around 50 percent of the UK's goods and 36 percent of its services exports, a withdrawal from the EU could have negative implications for trade and investment, both ahead of the event and following it.
"The medium-term impact -- which is the relevant timeframe from a credit perspective -- would depend on what alternative trade agreements the UK could negotiate with the EU" it said and went on as follows:
"Moody's expects that the UK would manage to negotiate some form of new settlement that replicates at least part of the current trade freedoms, but notes that the absence of such a settlement would adversely affect investment and growth and have negative implications for the UK's credit standing and rating."
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