Moody’s Says UK Facing Prolonged Spending Slowdown

Global ratings agency Moody’s has warned of a “prolonged” slowdown in spending in the UK economy.

“Alongside weaker GDP growth in 2017, a broader array of indicators point to a prolonged moderation in consumption, despite the UK labor market remaining firm thus far,” said Colin Ellis, a Moody’s managing director and co-author of the agency’s Brexit Monitor, Yahoo reported.

“Given higher inflation following sterling’s decline, surveys suggest that households are increasingly pessimistic about the future, with a weaker housing market and tighter credit availability acting as additional headwinds.”

The assessment comes just a day after the Office for National Statistics in Britain released data showing the UK economy suffered a “notable” slowdown in the first half of the year. It grew by 0.3% in the three months to June, fractionally better than the 0.2% performance in the first quarter.

The UK economy has proved more resilient to the effects of the Brexit vote than initially expected by economists, although they anticipate rising inflation to take its toll on both consumer confidence and spending—which would be bad news for Irish exporters selling into the UK market.

Moody’s said that business activity surveys are in line with five-year averages and pre-referendum levels, but GDP estimates suggest growth has slowed.

“Moody’s continues to believe—in its base case scenario—that the credit impact of Brexit will be ‘modest and manageable’ for UK-based issuers. However, there are clear and significant downside risks if the UK and EU do not reach a deal,” the ratings agency said.

Meanwhile, the Irish Stock Exchange is in talks over its options for a central securities depository and settlement system for Irish securities.

Most European markets already have their own central securities depositories, critical market infrastructure that settle vast amounts of securities on behalf of investors. However Irish securities currently settle in CREST, the UK-based CSD owned and operated by Brussels-based Euroclear since 2002.

Dublin officials now fear that under a so-called ‘hard Brexit’, which is looking increasingly likely, there is no guarantee that CREST would be granted equivalence with the EU’s Central Securities Depositories Regulation.

Potentially, the plans could result in the creation of an entirely new Dublin-based CSD.