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Spending Cuts Boost Britain's Chances Of Holding On To Top Credit Rating

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http://www.guardian.co.uk/business/2009/se...ating-uk-moodys

Britain is set to keep its top triple A credit rating, with the ratings agency Moody's expected to announce today that a downgrade is unlikely despite spiralling public debt.

A downgrade, which would drive up the government's borrowing costs, looks to have been averted because of the growing political consensus on the need to cut public spending as the economy recovers, according to the Financial Times.

The FT quoted Pierre Cailleteau, head of sovereign risk at Moody's, as saying that Britain's triple A status was "resilient" and that a downgrade was "very unlikely". Moody's downgraded Ireland's triple A status in July. But it said Britain had significant advantages that meant its debt would remain affordable. A big proportion of UK debt is long-dated, which means its cost will not rise rapidly if interest rates rise.

The news came as economists declared the recession over, with official data yesterday showing mothballed factories springing back to life and rising optimism in the City stoking a new merger spree.

The FTSE 100 index of blue-chip stocks pushed close to the 5000 mark yesterday for the first time since the aftermath of Lehman Brothers' collapse 12 months ago, prompting the second multibillion pound deal of the week. On Monday, confectionery group Cadbury rejected a £10.2bn approach from the American Kraft Foods and yesterday Orange and T-Mobile announced plans to merge their UK operations in a move that will create Britain's largest mobile phone operator.

Government figures yesterday showed that Britain's hard-pressed manufacturers had cranked up production for a second successive month in August after running down stocks dramatically in the early months of the year.

Wow thank god the rating agencies have a understanding of these things.

With there track record we are in safe hands as are out investors.

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