Should the UK be worried about a downgrade?

Christian Noyer (the governor of the Bank of France) recently ruffled some feathers when he stated that ratings agencies “should start by downgrading the UK” due to the country’s poorer fiscal fundamentals. There is definitely some truth to this statement. So why are ratings agencies not bothered? The main reason is that the BoE can always buy gilts to avoid a costly sovereign default, where as the ECB won’t be as forthcoming for any euro zone members. Also the UK government has a fixed plan for austerity measures put in place until 2016/17 where as France only has fixed measures for 2012. This is not to say that the UK’s AAA rating is set in stone as a major economic shock could tip the scales, such as an escalation to the euro crisis.