Moody’s Investors Service has placed the UK’s sovereign credit rating on negative outlook, saying the UK’s ability to set policy has weakened in the Brexit era along with its commitment to fiscal discipline.

The rating company affirmed Britain’s Aa2 long-term issuer and senior unsecured ratings.

The UK has not been downgraded by a major rating company in over two years.

The UK is currently rated AA at S&P Global Ratings and AA- at Fitch Ratings. Both have the country on negative watch.

“The increasing inertia and, at times, paralysis that has characterized the Brexit-era policymaking process has illustrated how the capability and predictability that has traditionally distinguished the UK’s institutional framework has diminished,” Moody’s said.

“The decline in institutional strength appears to Moody’s to be structural in nature and likely to survive Brexit given the deep divisions within society and the country’s political landscape.”

Moody’s added: “The UK’s debt burden is high and unlikely to fall, given growing pressures for spending increases, with little clarity on how they might be financed. 

“Brexit-related uncertainty has led to slower growth in business investment, which weighs on growth rates.”

Both of Westminster’s main political parties — the Conservatives and Labour — have promised big spending increases ahead of next month’s election. 

Moody’s said the risk was that the UK’s £1.8 trillion of public debt would begin to rise.

“Successive governments have announced large, permanent increases in public expenditures, most notably a large increase in spending on the National Health Service (NHS), outside the normal calendar for fiscal policy changes and without detailed policy plans,” Moody’s said.