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Brexit may not impact UK credit rating - Moody's

An employee at the European Commission adjusts a British flag ahead of the meeting between Prime Minister David Cameron and European Commission President Jean-Claude Juncker in Brussels, October 15, 2015. REUTERS/Yves Herman

LONDON (Reuters) - Britain may not face a credit rating downgrade if it votes to leave the European Union in a membership referendum due by the end of 2017, the lead UK analyst at ratings agency Moody's said in an interview with the Sunday Telegraph newspaper. Prime Minister David Cameron, who has promised to renegotiate Britain's EU ties ahead of the vote, favours staying in a reformed EU but has said he rules nothing out if he cannot get the changes he wants. Fellow rating agency Standard & Poor's has already lowered the outlook for Britain's triple-A rating due to the risks to economic growth posed by the referendum. It has also warned so-called 'Brexit' could prompt a two-notch downgrade. But Kathrin Muehlbronner, senior vice president at Moody's, told the Telegraph that uncertainty alone may not be enough to change Britain's rating. "What we care about is economic strength, and it is our view that the economic impact of a Brexit would be negative. The question is: how big would the damage be? Would we just be looking at a short-term moderation of growth where the UK puts in place other policies that mitigate the other downsides?," she said. "In that case, it might well be that there is no impact on the rating. For example, in a scenario where growth falls that doesn't change some of the fundamentals of the UK, we see it as a very strong, large, diversified and rich economy, with strong institutions." S&P is the only major rating agency that still gives Britain a top-notch credit rating, however. Moody's and Fitch Ratings downgraded Britain to one notch below AAA in 2013 because of the government's failure to reduce the budget deficit as quickly as planned. (Reporting by Kylie MacLellan; editing by Adrian Croft)