Brexit leaves UK's credit worthiness 'under downward pressure'

The UK's creditworthiness is "under downward pressure" after the vote to leave the European Union, according to a report.

A study by credit ratings agency Moody's said Britain should brace itself for a hit following the Brexit vote, with uncertainty impacting economic growth and weakening government finances.

Moody's expects UK gross domestic product (GDP) to hit 1.5% this year, before slipping back to around 1% in 2017.

However, the UK's large economy, its "solid institutional strength", flexible labour market and high wealth levels will help to reinforce its credit position, according to its annual credit analysis report.

Kathrin Muehlbronner, senior vice president at Moody's, said: "The economy will slow significantly in the near term, and medium-term growth prospects could be materially weaker if the UK failed to reach a new trade arrangement with the EU that allows it reasonably good access to the European Single Market."

She added: "Given the complexity and sheer amount of economic policy decisions in the coming years, the UK's institutions will be tested."

It comes after Moody's slashed Britain's credit outlook from stable to negative in the immediate aftermath the Brexit vote, while also revising its outlook for the UK banking sector from stable to negative.

The UK also saw Standard and Poor's strip it of its top credit grade last month.

S&P downgraded the country's sovereign rating by two notches, from AAA to AA, warning the Brexit vote would lead to ''a less predictable, stable and effective policy framework in the UK''.

Moody's latest study expects Britain's fiscal policy to be loosened this year and in 2017.

It said the UK budget deficit was likely to remain higher than what was expected before the EU referendum vote, coming in at 3.6% of GDP this year and 3.5% of GDP next year.