MNI BRIEF: UK Economy Already Hit By Brexit Effect: Moody's

The UK economy has already suffered "significant" damage from the Brexit process even before the end of the current transition period, Moody's Investor Services said in a report published Thursday, saying the loss of economic activity was already weighing on the country's creditworthiness.

According to Moody's, UK economy is at least 2.5% smaller than it would have been without the Brexit process. "Households have less spending power after inflation as a consequence of weaker real GDP, affecting the credit performance of asset-backed securities linked to household borrowing," the report said.

The UK sovereign rating has dipped from Aa1 with a stable outlook in May 2016, just ahead of the June referendum, to the current Aa3 with a stable outlook. The prospect of a potential 'no-deal' Brexit at the end of December means that further risks remain, Moody's noted, saying such an outcome "would have an additional negative effect on UK issuers through a range of channels, including further macroeconomic weakness. This weakness would be on top of the negative effects of the coronavirus pandemic".