According to leading credit ratings agency Fitch Ratings, the Scottish independence movement could be a threat to the UK’s AA+ credit rating. The agency famously set the UK’s credit rating at AA+ last year – down from AAA – after warning that public debt would need to be reduced in order to increase the country’s financial stability.
Scotland becoming independent would result in a “moderate risk” to the UK’s credit rating, according to the agency. If Scotland departed the United Kingdom, a return to the previous AAA rating would likely be delayed, the agency stated. The majority of the concern is due to Scotland’s new currency options if it no longer uses the pound.
Alex Salmond, First Minister of Scotland, claimed that the country would withhold a large share of public debt if it cannot share the pound with the UK following a move to become independent. All three major UK parties have refused to allow Scotland to retain the pound as its currency in the event that it becomes independent.
Fitch stated that any alternative Scottish currency option – be it shared dependence on the pound with the UK, or even the adoption of the euro – would result in higher risks of the UK. Withdrawing from the UK would also increase risks for Scotland, the agency stated.
According to a new report from Fitch, the effects of Scottish Independence “would be widespread” for both Scotland and the UK. The effects will include “political and legal issues” and affect “economics, finance and trade.” Fitch stated that these could “put downward pressure on [the UK’s] ratings.”
In order to qualify for an upgrade to AAA, the UK would need to lower its gross debt ratio. Fitch stated that the public debt ratio would need to be “steadily declining” for any upgrade to AAA to be considered. “All options” related to Scottish independence would result in new risks for the UK’s credit ratings.
