Britain retained its top “AAA” credit rating at Standard & Poor’s, which said the government has the capacity to meet its fiscal challenges, though the outlook for the grade remains negative.

“We believe that the government will implement its fiscal mandate and that it has the ability and willingness to respond rapidly to economic challenges,” S&P said in a statement in London.

The negative outlook means “at least a one-in-three chance” of a downgrade if economic and fiscal performances were to weaken beyond current expectations.

The affirmation comes after Chancellor of the Exchequer George Osborne’s March 20 budget, when he announced a cut in the growth forecast and said it will take longer than previously expected to lower the nation’s debt.

Moody’s Investors Service stripped Britain of its top grade in February, and Fitch Ratings put the nation on “watch negative” two days after the budget.

The independent Office for Budget Responsibility cut its 2013 growth projection to 0.6 percent from 1.2 percent on March 20.

The OBR also expects net debt to begin falling in 2017-18, a year later than previously planned. It’s the second time the debt target has slipped.

S&P put the U.K.’s rating on a negative outlook in December, a week after Osborne delivered his autumn statement, when he first pushed back his debt time frame.

Fitch said on March 22 that its decision to put the U.K.’s “AAA” rating on watch negative indicates a “heightened probability of a downgrade in the near term.” It plans to complete its review of the grade by the end of this month.

Investors often ignore rating and outlook changes.

Gilts have advanced since Moody’s cut Britain’s rating on Feb. 22. U.K. government bonds rose, with the 10-year yield falling to 1.63 percent, the lowest since September.

S&P said that the Bank of England’s accommodative policy stance should help to keep the pound “competitive.” 

(Bloomberg)