Moody's has downgraded the UK's credit rating, citing concerns about public finances and the effect of Brexit.

Moody's was the first major credit ratings agency to strip the UK of its AAA rating in 2013 and it has now cut the rating from Aa1 to Aa2.

The credit ratings agency said the outlook for public finances has "weakened significantly" since it last changed the country's rating.

Its report said: "Moody's expects weaker public finances going forward, partly linked to the economic slowdown under way but also reflecting the increasing political and social pressures to raise spending after seven years of spending cuts.

"Since 2015, the Government has been finding it increasingly difficult to implement the spending cuts that it has been targeting, in particular on welfare spending.


"More recently, the Government has yielded to pressure and raised spending in several areas, including for health and adult social care.

"It also agreed to above-budget pay increases for some public sector workers.

"While these additional expenditures will be funded out of current budgets, the pressure to continue to increase spending in the coming years is likely to remain high, in particular on health care and the public sector wage bill."

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The credit ratings agency also said that pressure on public funds would be "exacerbated" by the "erosion of the UK's medium-term economic strength that is likely to result from the manner of its departure from the European Union".

The UK Government said Moody's assessment of the economic toll of Brexit was "outdated" because Prime Minister Theresa May had laid out her plans for future relations with the EU in her speech on Friday.

Moody's changed its outlook on the country from negative to stable, meaning another downgrade is not imminent.