Osborne hails AAA credit rating

George Osborne has hailed confirmation of Britain's gold-plated AAA credit rating by a key agency.

The Chancellor said the verdict from Standard & Poor's showed the "world has confidence" in the coalition's economic policies.

The news is a boost to Mr Osborne after dire GDP figures prompted heavy criticism of his performance and the Government's austerity measures.

S&P said its outlook for the UK's coveted rating was stable and predicted the economy would pick up in the coming months.

"We project that despite recent weakness, the UK economy should begin to recover in the second half of 2012 and steadily strengthen, and we expect economic policy to continue focusing on closing the fiscal gap," the agency said in a statement yesterday.

"In our view, monetary flexibility remains a key credit strength owing to the British pound sterling's role as a global reserve currency."

S&P said its stable outlook for the rating reflected its "expectation that the UK Government will implement the bulk of its fiscal consolidation programme and that the economy should recover in the remainder of 2012 and strengthen thereafter".

But it added: "We could lower the ratings in particular if the pace and extent of fiscal consolidation slows beyond what we currently expect."

Mr Osborne said: "As Britain welcomes the world to our country for the Olympic Games, this is a reminder that despite the economic problems we face, the world has confidence that we are dealing with them.

"The deficit has fallen by a quarter; inflation has fallen by half; employment is rising, with British businesses creating over 800,000 new jobs; and the economy is rebalancing, with Britain now exporting more to the rest of the world than Europe."