Fitch says UK downgrade more likely
The rating agency Fitch has warned that it may downgrade the UK's credit rating in April.
It has put the UK's long-term rating on Credit Watch Negative, which it said showed "a heightened probability of a downgrade".
The agency said it was due to higher-than-expected debt levels and downward revisions to UK growth forecasts.
The review follows the Budget this week in which UK growth forecasts for 2013 were halved.
The Office for Budget Responsibility cut its growth forecast to 0.6% for 2013, from 1.2% in December.
The pound fell sharply against the dollar after the news from Fitch, dropping half a cent against the dollar. It has since come back to trade at around $1.5222.
'No easy answers'
Last month, Moody's stripped the UK of its top AAA rating, arguing that sluggish growth was making it harder for the government to cut its overspending.
The third big ratings agency S&P also has a AAA rating for the UK, but cut the outlook on that rating to negative last December.
In response to the Fitch announcement, the Treasury said: "This serves to underline that there are no easy answers to problems built up over many years. But we are, slowly but surely, fixing our country's economic problems.
"As the chancellor said at the budget: it's taking longer than anyone hoped, but we're on the right track."
Shadow treasury minister Chris Leslie said the news was "yet another blow to a downgraded chancellor who made keeping the confidence of the credit rating agencies the number one test of his economic policy".
He added: "George Osborne's plan has catastrophically failed on growth, living standards and the deficit. But instead of a change of direction and action to kick-start the flatlining economy all we got this week was more of the same failing policies."
Explaining the decision Fitch said it "reflects the latest economic and fiscal forecasts published by the Office for Budget Responsibility (OBR) that indicate that UK government debt will peak later and at a higher level than previously expected by Fitch.
"The persistently weak performance of UK growth, in part due to European growth, has increased uncertainty around the UK's potential output and longer-term trend rate of growth with significant implications for public finances."
Fitch first warned in March 2012 that the UK's top rating was under threat when it pointed out that the country's debt level was "significantly above the AAA median".