14/03/2012 17:37 GMT | Updated 14/05/2012 06:12 BST

UK Credit Rating: Fitch Downgrades Economic Outlook To 'Negative'

Britain's triple-A credit rating is increasingly at risk, a leading agency indicated today as it downgraded the economy's outlook from stable to negative in a pre-Budget warning.

Chief Secretary to the Treasury Danny Alexander said the move by Fitch was a "salutary reminder" of the debt problems facing the country and the need for continued austerity measures.

Fitch indicated that it felt it was more likely than not that Britain would lose its coveted top rating given its highly limited ability to absorb any further shocks from the crisis across Europe.

It is the second of the major agencies to issue such a caution, following Moody's last month.

Mr Alexander said: "This is a salutary reminder as to why Britain needs to deal with the enormous debts and deficits we inherited, why we have got to stick to those plans.

"It should be a wake-up call to anyone who thinks we can afford, as a country, to loosen the purse strings.

"We can't afford to do that and that's why there will be no unfunded giveaways in next week's Budget."

Fitch said it considered the Government's deficit-reduction plans to be "credible" and on track and that it expected them to be sustained in the Budget.

But it said that current projected levels of future debt were "at the limit of the level consistent with the UK retaining its 'AAA' status".

Although eurozone markets had calmed over recent weeks, there was still a risk that the crisis could re-emerge, the analysis concluded, spelling potential problems for the UK.

"The revision of the rating outlook to negative from stable reflects the very limited fiscal space to absorb further adverse economic shocks in light of such elevated debt levels and a potentially weaker than currently forecast economic recovery.

"In light of the considerable uncertainty around the economic and fiscal outlook, including the risks posed to economic recovery by ongoing financial tensions in the eurozone and against the backdrop of a still large structural budget deficit and high and rising government debt, the Negative Outlook indicates a slightly greater than 50% chance of a downgrade over a two-year horizon."

If there are no major financial shocks and the economy remains on track, the rating will be returned to stable in 2014, Fitch said.