The Moody’s downgrading of the UK credit rating suggests that Brexit is going to make us suffer


I was listening to BBC Radio 4’s Any Questions when I heard Charles Moore, former Telegraph editor and columnist, come out with the usual complaint that the BBC often run good news stories about the economy or business with the loaded rider “despite Brexit”.

Well I’d like to see the Telegraph spin the Moody’s decision to downgrade the UK’s credit rating from Aa1 to Aa2 as “UK judged more likely to default on its debt obligations – despite Brexit”.

For here is one bad news economic story that certainly does qualify for the rider “because of Brexit”.

Because of Brexit, as Moody’s indicates, the prospects for the British economy are more uncertain. Growth, employment, incomes and profits may be smaller than otherwise (ie if the UK stayed in the EU). A risk is not a certainty for sure, but a bigger risk than before.

When that happens, the tax take is lower and welfare spending higher, which means more government borrowing or yet more austerity (which could end you up in the same place). More borrowing by the Government means higher interest rates and a greater possibility that the British will have to resort to inflation (again) to erode their vast national debt.

So foreigners and local investors view lending to the British less favourably. Moody’s is only signalling that reality.

That in turn means a higher general level of interest rates, more costly mortgages and housing, less easy finance for business investment and more money spent on servicing the national debt – to the detriment of the NHS, the Royal Navy, HS2 and anything else that depends on public funding.

In short, Brexit makes us poorer – officially.

For those of us who voted Leave, the prospect of getting the sort of bespoke deal Theresa May called for again in Florence is becoming vanishingly thin. It may be a dastardly Franco-German conspiracy to take our jobs; it may be inherent in Brexit; it may because we have a weak divided and intellectually underpowered government. Maybe a mix of all that, and more.

No matter; a violent Brexit seems to be approaching with grim inevitability. Right now though, I think the Government needs to start taking that risk seriously and planning for it, as Mervin King has urged it – transitional arrangements or special terms may not be forthcoming.

Better still, the Government should give us a vote on the likely final terms. If we are to be poorer we deserve to be asked for our consent. Then none can say, as happens too often now, that “this isn’t the Brexit we voted for”. Britain needs that so it can rest easy with itself.