Ratings agency Standard & Poor’s warned Tuesday that a so-called hard Brexit could lead the U.K. into a moderate recession and weaken its long-term growth potential, which could then hurt its credit rating.
Although S&P’s base-case is that the U.K. and the European Union will reach a Brexit deal that will be succeeded by a transition phase through 2020 and a free-trade agreement, “we believe the risk of a no-deal has increase sufficiently to become a relevant rating consideration,” said credit analyst Paul Watters, in a news release.
This was particularly due to the impasse on the Irish border that London and Brussels haven’t been able to come to an agreement on, said Watters.
Last week, U.K. Prime Minister Theresa May told members of Parliament that the Brexit deal was 95% done. May has come under pressure continuously over her way of handling the negotiations, particularly from members of her own party who have taken a hard line on Brexit, and investors have been fretting about whether she could face a vote of no-confidence.