Standard and Poor's Cuts UK's Credit Rating From AAA To AA After Brexit Vote

After the pound hit a 31-year low.

Ratings agency Standard and Poor's (S&P) has stripped the UK of its top AAA credit rating following Friday's vote to leave the European Union.

S&P downgraded Britain's sovereign rating by two notches, from AAA to AA, the Associated Press reports.

The ratings agency described the vote to leave the EU as a "seminal event" that "will lead to a less predictable, stable and effective policy framework in the UK".

S&P is also keeping a negative outlook on the rating, which means it could downgrade the country even further.

The downgrading has been called "historic" and "worse than (the) financial crisis" by some experts.

S&P added in a report published on Monday that the outlook reflects the risk to the economy and public finances, as well as the pound's role as an international reserve currency.

It also cited "risks to the constitutional and economic integrity of the UK" as Scotland's strong vote to remain in the EU could raise the prospect of another referendum on Scottish independence.

It comes as the pound continued to struggle following Friday's record crash which saw sterling hit a 31-year low.

George Osborne gave a speech on Monday in a bid to calm the market turmoil that spread globally after Britain voted to leave the EU.

He said it would “not be plain sailing” for the British economy.

He said his emergency Brexit budget, predicted before the referendum, would not be necessary until the UK formally applied to leave the EU, which is expected when the new prime minister is in office in the autumn.

Meanwhile, many employers are planning employment freezes in the wake of Brexit, according to a survey by the Institute of Directors (IoD).

The leading business group surveyed 1,000 of its members and found a quarter were planning freezes while 5% were planning job cuts.

The FTSE 100 performed better than expected on Monday morning, falling by 0.46% after Osborne’s speech before the markets opened.

London’s premier index dropped 24.75 points to 6,114, a vast improvement on the collapse on Friday.

Trading in the shares of two banks fell by so much the trading had to be suspended.

Barclays share price fell by 10.3%and RBS by 15%, triggering an automatic stop on trading to allow them to recover from the downward spiral.

Shares in housebuilders also took a dive, with both Taylor Wimpey and Persimmon slumping. Foxtons, which issued a Brexit profit warning, plunged 17%.

EasyJet also fell by 14%, following a statement saying it will take a £28 million hit following two months of turbulence, adding that Brexit would have a negative impact on the airline.

<strong>Chancellor George Osborne speaks at The Treasury, London, where he moved to try to calm market turmoil triggered by the pro-Brexit vote</strong>
Chancellor George Osborne speaks at The Treasury, London, where he moved to try to calm market turmoil triggered by the pro-Brexit vote
Stefan Rousseau/PA Wire

Tony Cross, market analyst at Trustnet Direct, said: “That profit warning from Foxtons is doing the wider sector no favours.

"The biggest faller in early trade however is easyJet, with a profit warning having been issued by the airline, highlighting the damaging effects of a plummeting pound and the accompanying economic uncertainty.

“There’s still an awful lot of questions that need to be answered as to what happens next and until we see some clarity here, the volatility is likely to continue.”

On Friday credit ratings agency Moody’s bumped the UK’s bond rating from stable to negative.

Moody’s said that Britain would face substantial challenges in order to successfully negotiate its exit from the EU.

“During the several years in which the UK will have to renegotiate its trade relations with the EU, Moody’s expects heightened uncertainty, diminished confidence and lower spending and investment to result in weaker growth,” the agency said.