The UK's credit rating has been downgraded by one of the big three ratings agencies.
Moody’s cited weak economic growth and other factors for its decision to lower Britain's grade by one notch to Aa3 - its fourth-highest ranking.
The pandemic has blown a big hole in the public finances, with the Government spending billions to support jobs and prop up an economy that has already suffered its biggest quarterly contraction on record.
The pandemic has pushed the national debt above £2 trillion, or more than 100pc of GDP.
“Even before the coronavirus-induced shock, a combination of persistently low productivity growth since the global financial crisis, tepid business investment since the June 2016 EU referendum, and prolonged uncertainty over the eventual future trading relationship with the EU were weighing on the UK’s growth performance,” Moody’s said.
Moody’s, which has had a negative outlook on the UK since November, said its outlook on the new rating was stable.
Sterling was largely unmoved after Moody’s announcement late Friday night, ending at $1.2915.
Chancellor Rishi Sunak has vowed to repair the public finances, but many economists and the International Monetary Fund have warned against ending financial support when millions are facing a fresh wave of restrictions in a bid to stem the virus.
The material increase in debt poses risks to debt affordability in future years, Moody’s said.
The economy faces further stress as the UK nears the end of its transition out of the European Union.
“Negative long-term structural dynamics have been exacerbated by the decision to leave the EU and by the UK’s subsequent inability to reach a trade deal with the EU that meaningfully replicates the benefits of EU membership,” Moody’s said.
The pandemic “has brought new and considerable pressures on the UK economy” and Moody’s sees “a sharper peak-to-trough contraction for the UK than for any other G20 economy. Moody’s forecasts also reflect the view that lingering Brexit uncertainty will hold back the recovery in the second half of the year.”
Fitch Ratings downgraded the UK to AA minus in March, citing the weakening of public finances caused by the impact of Covid, while it is rated AA, the third-highest investment grade, by S&P Global Ratings.