S&P Global Ratings says the British government has not yet grasped the principles ruling the European Union’s single market and says the country is heading for a so-called “hard Brexit”.
The ratings agency says the UK would take the largest economic hit from leaving the bloc, The Guardian reports.
S&P also warns in its latest country report for the UK that the UK faces a further downgrade after it was cut from AAA to AA immediately after the Brexit result.
The report says the UK government does not grasp the “indivisibility” of the single market’s four freedoms, which are the free movement of people, capital, goods, and services.
S&P chief sovereign credit officer Moritz Kraemer says: “Even if Westminster were to acknowledge the EU position, it is hard to fathom how a rather hard Brexit can be avoided unless both sides become much more flexible than they appear today.”
The report says the UK's economic power is diminishing, accounting for 5 per cent of global GDP compared to a projected 3 per cent in 2020, and is deeply divided following the Brexit vote.
Kraemer says: “Far from healing festering wounds, as was then Prime Minister David Cameron’s intention, the referendum has deepened and laid bare the schisms in British society.
“Most of the economic impact will hit Britain itself. The second-round effect on the world economy is likely to be more limited, as the UK economy accounts for a small and shrinking share of global GDP.”