Fitch places UK rating on negative watch

Fitch has placed Britain's credit rating on watch for a possible downgrade, the ratings agency says. Source: AAP

FITCH says it has placed Britain's top-level AAA credit rating on watch for possible downgrade because the government's latest forecasts expect debt to peak later and at a higher level than previously expected.

"Fitch Ratings has placed the United Kingdom's 'AAA' Long-term Issuer Default Ratings on rating watch negative (RWN) indicating a heightened probability of a downgrade in the near term," it said in a statement.

The ratings agency said it plans to complete its review of Britain by the end of April.

The news came one month after rival agency Moody's stripped Britain of a triple-A debt rating, saying government debt was still mounting and that growth was too weak to reverse the trend before 2016.

Fitch said "the RWN reflects the latest economic and fiscal forecasts published by the Office for Budget Responsibility that indicate that UK government debt will peak later and at a higher level than previously expected".

Gross government debt is now forecast to peak in 2016-17 at 100.8 per cent of gross domestic product before starting to decline.

Earlier this week, on Wednesday, British finance minister George Osborne unveiled another painful austerity budget that also slashed economic growth forecasts and raised borrowing estimates.

The economy is now expected to grow by just 0.6 per cent in 2013, compared with previous guidance of a 1.2-per cent expansion, according to the OBR.

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