Moody's affirms UK's Aa3 rating ahead of budget

(Reuters) -Global ratings agency Moody's affirmed the United Kingdom's Aa3 rating on Friday, citing the significant credit strength of the world's sixth-biggest economy and the government's commitment to reducing the large budget deficit.

The agency maintained the country's outlook at "stable".

"The rating affirmation incorporates our expectation of fiscal measures consistent with the government-defined fiscal rules in the upcoming 2026 budget due to be presented on 26 November, which will help to keep the cost of debt moderate," Moody's said.

Finance minister Rachel Reeves, in her second annual budget, is expected by economists to raise taxes by 20 billion to 30 billion pounds to keep her budget goals on track.

Reeves has vowed to end borrowing to fund day-to-day spending by 2029-30, although the government will continue to borrow significantly for long-term investment projects.

Official data released earlier on Friday showed that public borrowing in the first six months of the 2025-26 tax year was 10 billion pounds higher than the country's budget watchdog had predicted at the time of Reeves' last budget update in March.

The 117 billion pounds of borrowing was the highest in nominal terms since 2020, when the government spent heavily during the COVID-19 pandemic, causing public debt to lurch higher.

(Reporting by Shanima A in Bengaluru, David Milliken in London; Editing by Vijay Kishore)