Gordon Brown has received yet another big blow to his government as Standard and Poor has downgraded Britain’s sovereign credit rating from stable to negative. This is the first time since the ratings began in 1978 that Britain has been put in this situation and will certainly add pressure on the PM to hold a general election. The downgrade may also have severe consequences for the nation, which now runs the risk of losing its top-tier AAA credit rating which will essentially push the cost of borrowing up for the country.

S&P have suggested that the downgrade came in light of the growing deficit that Britain has on its shoulders which could reach as high as 100% of GDP. Recently released figures showed that Britain has run a record deficit in April of £8.5 billion. This news comes after the IMF have stated that Britain requires a concrete plan to reduce the overall deficit in the upcoming years, however it is likely that the public will once again bear the brunt of the government’s spending mishaps. 

The news of the downgrade sent shivers down the City causing the FTSE to close almost 3% down for the day, with the GBP also taking a hit on the back of the release. Over the long term, the impact of the cut in credit rating and ongoing deficit will be much more significant and apparent to the Britain public. Going forward, regardless of the outcome of the next general election, tax hikes and spending cuts will be the order of the day.