ALSO READBrexit impact: A year after announcement, Europe & UK share trends diverge What Brexit could do to breakfast Fuzzy Brexit? High stakes for India over impact on ties with UK, EU Brexit: Charity causes Britain's 'leave' and 'remain' voters support UK govt needs phased Brexit: Finance minister Philip Hammond
Moody's, one of the major ratings agencies, downgraded the UK to an Aa2 rating from Aa1 on Friday, BBC reported.
It said leaving the European Union was creating economic uncertainty at a time when the UK's debt reduction plans were already off course.
Moody's said the government had "yielded to pressure and raised spending in several areas" including health and social care.
It says revenues were unlikely to compensate for the higher spending.
The agency said because the government had not secured a majority in the snap election it "further obscures the future direction of economic policy".
It also said Brexit would dominate legislative priorities, so there could be limited capacity to address "substantial" challenges.
It added "any free trade agreement will likely take years to negotiate, prolonging the current uncertainty for business".
Moody's has also changed the UK's long-term issuer and debt ratings to "stable" from "negative".
Moody's stripped Britain of its top-notch AAA rating in 2013.
The government said the latest downgrade followed a meeting on September 19, and did not consider the prime minister's speech on Friday, in which she outlined her vision for Brexit.
"The Prime Minister has just set out an ambitious vision for the UK's future relationship with the EU, making clear that both sides will benefit from a new and unique partnership," it said.
"The foundations on which we build this partnership are strong."
It said it had a robust economic record and had made substantial progress in reducing the deficit.
"We are not complacent about the challenges ahead, but we are optimistic about our bright future."
Credit rating agencies, in essence, rate a country on the strength of its economy — scoring governments or large companies on how likely they are to pay back their debt.
A rating downgrade can affect how much it costs governments to borrow money in the international financial markets. In theory, a high credit rating means a lower interest rate, and vice versa.
(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)