LONDON, Nov 21, 2025 – Global credit rating agency Moody’s has affirmed the United Kingdom’s Aa3 rating, citing the nation’s strong economic fundamentals and the government’s commitment to reducing its budget deficit. The ratings agency also maintained the UK’s outlook at “stable”, ahead of Chancellor Rachel Reeves’ second annual budget scheduled for November 26, 2025.

Moody’s Highlights UK Credit Strength

Moody’s emphasized that the rating affirmation reflects confidence in the UK government’s fiscal management and adherence to planned budgetary rules. The agency noted that upcoming fiscal measures in the 2026 budget are expected to support debt sustainability and moderate borrowing costs over the medium term.

“The rating affirmation incorporates our expectation of fiscal measures consistent with the government-defined fiscal rules in the upcoming 2026 budget due to be presented on 26 November, which will help to keep the cost of debt moderate,” Moody’s stated.

Anticipated Fiscal Measures in the 2026 Budget

Economists predict that Chancellor Reeves will raise taxes by £20 billion to £30 billion in her 2026 budget to meet fiscal targets. The government has reaffirmed its goal to end borrowing for day-to-day spending by 2029-30, though borrowing for long-term investment projects is expected to continue.

Recent official data highlights the scale of fiscal challenges. Public borrowing in the first half of the 2025-26 tax year totaled £117 billion, £10 billion above previous forecasts by the UK budget watchdog. This marks the highest nominal borrowing since 2020, when pandemic-related spending pushed public debt to historically high levels.

Implications for UK Debt and Economy

Maintaining the Aa3 rating and a stable outlook is crucial for the UK as it continues to navigate post-pandemic economic recovery, rising inflation, and global financial pressures. A stable credit rating helps the government secure favorable borrowing rates, supporting ongoing infrastructure and investment projects while demonstrating fiscal credibility to investors.

Moody’s affirmation reflects confidence that the UK will adhere to its medium-term fiscal strategy, balancing budget discipline with strategic borrowing for growth, while addressing the challenges posed by rising public debt and borrowing costs.

Looking Ahead

The upcoming budget is expected to provide greater clarity on the government’s approach to taxation, public spending, and deficit reduction, shaping the UK’s financial outlook for the next decade. Market observers will be closely monitoring Reeves’ announcements for signals on economic growth, borrowing strategy, and fiscal sustainability.