The ratings agency reaffirmed the UK’s ‘AAA’ long-term sovereign credit rating and ‘A-1+’ short-term sovereign credit rating.
Meanwhile, the country’s transfer and convertibility assessment also remained ‘AAA’.
S&P attributed the improved outlook to demand for long-dated gilts by domestic institutional investors and from non-residents for sterling-denominated UK government debt.
Trevor Cullinan, S&P’s credit analyst, said: “The ratings on the UK reflect our view of the country’s wealthy and diversified economy, fiscal and monetary policy flexibility, and relatively adaptable product and labour markets.”
S&P also believed the completion of the Spending Review has demonstrated the coalition government’s aim to tackle the “structural deterioration” of public finances over the last few years.
“We expect that the government will implement most of its expenditure-led fiscal consolidation program, which we believe is likely to cause the net general government debt burden to peak at approximately 80% of GDP in 2013 and decline thereafter,” Cullinan added.
The ratings agency predicted the UK will see economic growth averaging at 2% over the next five years, less than the 2.4% forecast by the Office for Budget Responsibility.
It put the lower forecast down to the rebalancing of the economy away from credit-fuelled private consumption and toward a higher contribution from more externally focused sectors.
