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London, 22 February 2013

Moody’s Investors Service has today downgraded the domestic- and foreign-currency government bond ratings of the United Kingdom by one notch to Aa1 from Aaa. The outlook on the ratings is now stable.

The key interrelated drivers of today’s action are:

1. The continuing weakness in the UK’s medium-term growth outlook, with a period of sluggish growth which Moody’s now expects will extend into the second half of the decade;

2. The challenges that subdued medium-term growth prospects pose to the government’s fiscal consolidation programme, which will now extend well into the next parliament;

3. And, as a consequence of the UK’s high and rising debt burden, a deterioration in the shock-absorption capacity of the government’s balance sheet, which is unlikely to reverse before 2016.
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  • We now expect the United Kingdom’s net general government debt as a percentage of GDP to continue to rise in 2015, before declining again.
  • Future employment or growth shocks could pressure government finances further.
  • We are therefore revising our outlook on the unsolicited long-term ratings on the U.K. to negative, from stable, reflecting our view of a one-in-three chance that we could lower the ratings if the U.K.’s economic and fiscal performances weaken beyond our current expectations.
  • We are affirming our ‘AAA/A-1+’ long- and short-term unsolicited sovereign credit ratings on the U.K.
  • We have also revised to negative from stable the outlook on our ‘AAA’ ratings on the Bank of England and the debt program of Network Rail Infrastructure Finance PLC.

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Her Majesty the Queen has been pleased to approve the appointment of Mark Carney as Governor of the Bank of England from 1 July 2013. He will succeed Sir Mervyn King.

Welcoming the appointment the Chancellor of the Exchequer, the Rt Hon George Osborne MP, said:

“Mark Carney is the outstanding candidate to be Governor of the Bank of England and help steer Britain through these difficult economic times. He is quite simply the best, most experienced and most qualified person in the world to do the job.

He has done a brilliant job for the Canadian economy as its central bank Governor, avoiding big bail outs and securing growth. He has been chosen by the rest of the world to be the chair of the international body, the Financial Stability Board, charged with strengthening global financial regulation after the financial crisis.

Along with its central role in monetary policy, this Government has put the Bank of England back in charge of regulating our financial system so that we don’t repeat the mistakes of the last decade. Mark Carney is the perfect candidate to take charge of the Bank as it takes on these vital new responsibilities. He will bring strong leadership and a fresh new perspective.

I look forward to working with Mark as we continue to rebalance our economy, deal with our debts, and equip Britain to succeed in the global race. We needed the best – and in Mark Carney we’ve got it.”

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