Brexit continues to be a drag on the UK economy, and so are other external shocks, such as the pandemic, inflation and the war in Ukraine.

These were reasons given by KBRA’s Ken Egan, lead analyst on the UK credit rating, as he highlighted the main factors identified for the KBRA’s decision to downgrade the UK.

The reasons were given during a podcast Tuesday as the analyst pointed out that UK and US households are getting poorer with rising expenses and rising government debt payments.

The podcast outlined the management of the UK ratings since KBRA first assigned its rating in 2018. It goes through the credit rating history of the UK, highlights the main factors identified for the downgrade in its recent credit report, and provides an update on the current macro situation in the country.

KBRA Europe downgraded the long-term issuer ratings of the United Kingdom of Great Britain and Northern Ireland (UK) to AA from AA+.

KBRA also affirmed the short-term issuer ratings of the sovereign at K1+.

The outlook on the long ratings has been revised to stable from negative following the downgrade.

The ratings agency said the stable outlook reflects the credit strengths inherent in the UK’s large, advanced and resilient economy and its strong financing flexibility.

The downgrade of the UK’s long-term credit ratings reflects its relatively high sensitivity to above-target inflation due to the structure of its economy and Brexit effects, the KBRA podcast reported.

“Brexit related uncertainties continue to hamper economic performance,” the analyst’s report noted. “Fiscal and monetary headwinds persist, and these will likely challenge underlying credit metrics.

“Political uncertainty also compounds these issues, mainly with regard to the future relationship with the European Union.”