S&P affirms UK’s AAA rating

Britain had its AAA credit rating affirmed by Standard & Poor’s yesterday, but the ratings agency retained its negative outlook over continued deficit concerns.

Despite Chancellor Alistair Darling's pledge to cut the deficit by upwards of 50% by 2014, S&P says the Government has not been specific enough on the reduction.

"In the absence of a strong fiscal consolidation plan, the UK's net general government debt burden may approach a level incompatible with a AAA rating," S&P says.

"We expect to review the long-term rating and outlook again once medium-term fiscal policy becomes clearer following the 2010 parliamentary elections."

UK Government bonds rallied yesterday, with the 10-year gilt yield falling 5 basis points to 3.98%.