The UK risks losing its top-tier rating after Standard & Poor's downgraded its outlook to negative from stable Tuesday, citing a sharp deterioration in its public finances.
Even factoring in the fiscal tightening mentioned in the UK budget announced last month, the country's general debt burden may get close to 100% of gross domestic product and stay near that level for the medium term, S&P said in a statement.
The rating agency's projections include estimates for the potential fiscal toll of the government's support for the banking system, which S&P puts at up to 145 billion pounds ($226.2 billion).
This, together with uncertainty over when the erosion in government revenues may be curtailed and how fast can spending be reined in, are likely to bring the government debt burden to nearly 100 percent of GDP by 2013, according to the rating agency.
"A government debt burden of that level, if sustained, would in Standard & Poor's view be incompatible with a 'AAA' rating," the statement said.
The risk that the UK would lose its AAA rating is "certainly a possibility," Stuart Bennett, an economist at Calyon, told CNBC.com
"It wouldn't be the first European country to go down that route."
Up to the Government
Ireland, Greece, Portugal and Spain have lost their AAA ratings because of an acute deterioration in their public finances since the crisis started.