Rating agency S&P cuts UK forecasts, warns of 'perfect storm'

A worker shelters from the rain under a Union Flag umbrella as he passes the London Stock Exchange in London, Britain, October 1, 2008. REUTERS/Toby Melville/File Photo

LONDON (Reuters) - Rating agency S&P Global cut its UK forecasts for the year again on Wednesday to a 8.1% contraction and warned of a “perfect storm” next year if efforts to strike a post-Brexit EU trade deal fail.

S&P, which delivered its first ever double-notch downgrade to a triple A-rated country when Britain voted to leave the European Union in 2016, said it no longer assumed the Brexit transition period will be extended this year.

Instead it expects London to strike a “core” free trade deal starting 2021, though the risk that negotiations fail remains “elevated”.

“A second, bigger wave of (coronavirus) infections in autumn, then followed by a switch to WTO trade rules in January would be a perfect storm,” S&P said.

Reporting by Marc Jones, editing by Maiya Keidan