Britain credit rating downgraded as markets suffer more Brexit losses - as it happened

OK, time to wrap up for tonight. A quick reminder of the key points.

Britain has lost its final gold-plated AAA rating, following Standard & Poor’s decision to downgrade the country by two notches, to AA.

S&P warned that the Brexit vote will lead to “less predictable, stable, and effective policy framework in the UK” and hurt growth.

Fitch, another major credit rating, has also downgraded Britain to AA tonight, from AA+.

The moves came after another day of losses on the stock markets. The FTSE 100 index lost another 156 points, while medium-sized companies on the FTSE 250 fell by 6%.

Banking shares suffered most, amid fears of a UK recession, with Royal Bank of Scotland plunging by 25% at one point.

The pound hit a new 31-year low against the US dollar, despite chancellor George Osborne trying to calm the market panic over the EU referendum vote.

We’ll be back tomorrow with more live coverage of the market reaction to the ongoing Brexit crisis. Goodnight!

Surely we’ve suffered enough...

Tuesday’s Guardian front page focuses on the race to replace David Cameron as prime minister:

Some more front pages to digest before the morning:

The gloom gripping the City won’t have been helped by tonight’s unmitigated shambles in the football:

Howard Archer of IHS Global Insight sums it up:

The credit rating of the UK economy may have been downgraded by 2 notches by Standard & poor’s this evening; the football team deserves to be cut to junk status.

(PS: Well done Iceland)

View image in fullscreen

From New York, my colleague Sam Thielman reports on another bad day on Wall Street:

US stock markets were rocked again on Monday by the aftershocks of the UK’s referendum decision to quit the European Union.

Since the results became known on Thursday, the major US markets have suffered their biggest two-day fall in 10 months. Monday’s dips came as the pound collapsed to its lowest point since 1985 and the UK lost its triple-A credit rating.

The Dow Jones Industrial Average finished the day down 260 points, or 1.5%, the S&P 500 dropped 1.8%, and the technology-heavy Nasdaq ended the day 2.5% down as the sell-off sparked by the Brexit vote in the UK continued to reverberate through the American market....

This is worth repeating...

Fitch says it has downgraded Britain’s credit rating from AA+ to AA because the decision to leave the EU will have “a negative impact on the UK economy, public finances and political continuity.”

The rating agency warns that Britain faces an “abrupt slowdown in short-term GDP growth”, as businesses defer investment while tehy wonder how the Brexit vote will affect them.

The agency says:

Fitch has revised down its forecast for real GDP growth to 1.6% in 2016 (from 1.9%), 0.9% in 2017 and 0.9% in 2018 (both from 2.0% respectively), leaving the level of real GDP a cumulative 2.3% lower in 2018 than in its prior ‘Remain’ base case.

Fitch also fears that medium-term growth will also likely be weaker, as Britain will find it harder to export to the EU. Lower immigration, and a fall in investment from overseas, will also hurt the economy, as could a weaker pound.

Fitch adds that Britain’s future trade relationship with the EU is crucial:

Statements by UK and EU leaders will provide some guidance on the UK government’s policy objectives, the likelihood of achieving them and the timeframe for negotiation. However, Prime Minister David Cameron has indicated that negotiations with the EU will not begin in earnest until 4Q16, and the final position may well not be known for several years.

And Fitch also fears that Britain’s budget deficit will be higher than previously expected, as weaker economic growth means lower tax revenues.

This implies that the general government debt ratio will continue rising over the forecast horizon, reaching 91% of GDP in 2017, compared with the debt ratio stabilising previously.

And then there’s the political crisis raging in Westminster; Fitch says this is also bad for Britain’s credit worthiness:

The outcome of the referendum has precipitated political upheaval, including the announced resignation of the Prime Minister, contributing to heightened uncertainty over government economic policies and diminished scope for policy implementation at the current conjuncture.

And there’s more.....

Furthermore, the fact that a majority of voters in Scotland opted for ‘Remain’ makes a second referendum on Scottish independence more probable in the short to medium term. The Scottish First Minister Nicola Sturgeon has indicated that a second referendum on Scottish independence is “highly likely”. A vote for independence would be negative for the UK’s rating, as it would lead to a rise in the ratio of government debt/GDP, increase the size of the UK’s external balance sheet and potentially generate uncertainty in the banking system, for example in the event of uncertainty over Scotland’s currency arrangement.

There’s more here (if you can face it):

Britain’s credit rating has just suffered a double blow, with the news that Fitch has also downgraded it to AA.

More details to follow....

Take a deep breath, folks. Another day of market turmoil is over.

Wall Street has closed, with the Dow Jones industrial average shedding 260 points, or 1.5%.

Credit card firm American Express was the biggest faller on the Dow, down around 3.9%.

Reuters reports that Wall Street has suffered its biggest two-day fall in 10 months, since the worries about China’s slowing economy.

Britain’s Brexit crisis is going to dominate tomorrow’s papers.

The Financial Times’ front page has just landed, focusing on the heavy losses on the stock markets and the pound’s drop to a 31-year low.

The FT’s economics editor, Chris Giles, says S&P’s downgrade is a cause for serious concern:

Shares are still falling in New York, with 30 minutes trading today.

Financial stocks are among the big fallers, as in Europe today.

It’s been a really dramatic day in the financial world; here’s our updated news story:

The scale of S&P’s downgrade tonight is unprecedented, says Reuters’ Jamie McGeever, showing the full impact of Brexit.

Back in 2012, the LabourList website gathered together George Osborne’s various warnings about the need to keep the AAA rating.

For example, in 2009, he declared:

“I have argued it with my opponents in difficult economic times, when I warned them last autumn that the cupboard was bare and the discretionary borrowing had to stop – and now Britain faces the humiliating possibility of losing its international credit rating.

Here’s the full list: Some things George Osborne has said about the AAA credit rating

All good clean fun. But in the chancellor’s defense, he did warn the public not to vote for Brexit....

S&P held back the downgrade until the London stock market had closed, so the City hasn’t had chance to react yet.

But over in New York, shares are falling deeper into the red on Wall Street.

The Dow Jones industrial average has now shed 306 points, a fall of 1.75% today, on top of the 611 points shed during Friday’s tumble.