NEWS
02/08/2011 13:55 BST | Updated 02/10/2011 06:12 BST

UK Economy May Still Suffer Despite American Debt Deal

The UK economy may still suffer from the effects of the US Debt crisis, despite Washington's 11th-hour deal between the Republicans and Democrats to avert default.

According to Aidan Manktelow, an economist with The Economist Intelligence Unit, the doomsday scenario has been avoided, yet there is still plenty of cause for concern.

"Despite the deal, the US is still likely to be downgraded by the credit rating agencies as the current deal doesn't come close to meeting to $4 trillion in cuts the agencies demanded."

"S&P have already said the chance of a downgrade is 50/50 and if it happens it is likely to come in the next three months."

A downgrade may have adverse implications for the financial markets in the short-term, though Manktelow believes the extent of the damage is debatable.

"The real concern is long-term. What happens in the US has huge implications for the UK and America's economy looks in trouble. The recently published second quarter growth figures show a real slowdown."

"Due to politics, the US has embarked on a course of austerity when its economy demands greater stimulus. Cutting spending is the last thing they should be doing right now."

"If the US falls into recession it could have grave consequences for the other global economies."