Media captionWhat does a ratings agency warning mean? The BBC's Andrew Verity explains

Moodys, one of the big three credit ratings agencies, has cut its outlook for the UK economy from stable to negative.

Credit rating agencies, in essence, rate a country on the strength of its economy.

More specifically, they score governments (or large companies) on how likely they are to pay back their debt.

A rating affects how much it costs governments to borrow money in the international financial markets. In theory, a high credit rating means a lower interest rate (and vice versa).

This is because of concerns at the impact that leaving the European Union may have on the UK economy. Moodys warned that the referendum result may have negative implications for the countrys medium-term growth outlook.



Shares in the countrys biggest companies slumped Friday, bank stocks crashed, and the pound suffered its biggest one-day fall on record. Growth forecasts for this year and next were slashed.

Things could get much worse for the worlds fifth biggest economy unless it gets to grips with three big questions:

1. What kind of exit deal can it get from the EU?

Although stunned by the Brexit vote, European leaders want formal divorce talks to start right away.

But with Britain in limbo politically for three months following the resignation of British Prime Minister David Cameron, thats unlikely to happen.

Boris Johnson, a leader of the Leave campaign and frontrunner to succeed Cameron, is in no hurry to trigger Article 50 of the EU treaty that will start a required two-year countdown to Britains unprecedented departure.

This matters because the EU is by far the UKs biggest trading partner. Big companies and banks in the UK that do a lot of business in Europe face a very uncertain future.

The Handelsblatt newspaper said Germany would likely insist that there could be no automatic access for the UK to sell goods and services to 440 million people in the EU. If the UK were allowed free access to European markets without being an EU member, that could encourage other countries to leave, the newspaper said, citing plans prepared by the countrys finance officials.

Just how much both sides are prepared to compromise is very unclear. And its that uncertainty that could turn out to be a growth killer, WPP CEO Martin Sorrell told CNNMoneys Nina dos Santos.

2. How will it cope with its financial black holes?

The messy period ahead is likely to hurt business and consumer confidence, leading to much slower growth, stagnation or even recession. And the economy could end up being smaller over the long term as investment and jobs that would have come to the UK end up in the EU.

The independent Institute for Fiscal Studies estimated before the vote that the budget hole arising from weaker growth would be far bigger than the savings the UK could make by not contributing to EU finances.

In the long run taxes would have to rise, spending fall and/or public borrowing would have to rise, the IFS said.

Moodys said Friday it may cut the UKs credit rating -- potentially making it more expensive for the government to borrow money -- because of the economic and political uncertainty unleashed by the Brexit vote.

The UK has the second highest budget deficit in the G7 after Japan, and the highest current account deficit -- that means it has to borrow more from the rest of the world to fund its imports than any other major advanced economy.

If investors start pulling money out of the UK, further pressuring the pound, this would raise questions over the funding of the UKs large current account deficit... and more fundamentally over the role of [the pound] as one of the few global reserve currencies, Moodys warned.

3. How can the Brexiteers deliver on their promises?

The referendum campaign was unlike an election in that both sides were backed by politicians from many parties. But it was similar in the way campaigners threw around reckless promises that some are now regretting.

The official Vote Leave campaign, for instance, claimed the EU was costing the UK £350 million a week, enough to build a brand new, fully staffed ... hospital every week. It continued to make that claim despite being repeatedly admonished by the independent statistics watchdog for misleading voters.

Nigel Farage, leader of the UK Independence Party who campaigned for Brexit (but wasnt part of the Vote Leave group), said implying that money sent to the EU could be spent on the health service in future was a mistake.

No I cant [guarantee it], and I would never have made that claim. That was one of the mistakes that I think the Leave campaign made, he said on British TV.

Whoever succeeds Cameron as prime minister will also face demands to make good on other pledges. Brexiteers told Britains farmers and poor regions such as Cornwall that they wouldnt lose out financially once EU subsidies and infrastructure funds are cut off. They made similar commitments to support UK universities and scientists -- the second biggest beneficiaries of research grants from the EU.

Cornwall, in southwest England, voted in favor of leaving the EU. Local officials are already seeking confirmation from the government that the county wont be worse off as a result.

Many voters say they backed Brexit to reduce immigration, running at record levels. But they may be disappointed on that score too because the EU is likely to insist on some free movement of workers in return for market access.



Hot days and lack of rain bring difficult times to farmers in Cambodia, but one man uses a loan to pipe in the water he needs.

Its early in the morning, and already about 38 degree Celsius (100 Fahrenheit). A man with a prosthetic leg is carrying a pump to a pond located in the middle of a very dry rice field about 800 meters (more than 700 yards) away from his house in Siem Reap province.

His name is Im Dein, and hes a 56-year old farmer who lost his leg in the civil war with the Khmer Rouge in the early 1980s. He says that for four or five months his village has been suffering in a severe drought, and all the farmers and their families have been struggling to find enough water.

Dein says the pump is not heavy, and hes grateful to have it now. He joined a Saving for Change group organized by Oxfams partner RACHA a few years ago, which allowed him to borrow the money to buy the pump and piping he needs to move this water to his home and fields. Its saving him, his wife, daughter, and granddaughter the effort of carrying water all that distance.

Deins face changes completely when he talks about the drought. He said decades ago when he first arrived in this village, called Pong Ro Thme, it was surrounded by a very thick forest with big trees. There was frequent rainfall and the village had water and a lot of fish in nearby streams.

These days, he says, its very hot, water is very scarce for five months of the year, and the fields are very dry. No water means we cant survive, Dein says. He blames widespread deforestation and climate change for the higher temperatures and lack of rain.

Struggling with drought

In Cambodia, drought and water shortages are affecting 18 of 25 provinces. More than a quarter of a million families, mostly farmers, are affected by the drought according to the National Committee for Disaster Management. In addition, the local media reports that this severe drought has killed tons of fish and hundreds of other animals.

In Deins village, the drought has people waiting in long lines for hours to collect water. There is only one well that has water we can use, he says. I went to collect water at 7pm; I was able to get the water back home at 11 or 12. Sometimes, he says, he sleeps at the well in order to be there when there is water in the morning. The closest well to his house, about 200 meters away, is now completely dry.

Dein pumps water from this pond to his house and rice field. Photo: Savann Oeurm/Oxfam America

Dein says he is now starting to look for water sources farther and farther away from his villagehe can walk four or five kilometers in search of it. Some days, he says he has to buy water for him and his family and animals to drink. This can cost as much as $6.50.

Lack of rain is making growing rice very difficult, Dein says because his village has no reservoir for storing water. This year, I received only eight sacks of rice because the rain started very late in the cultivation season. His normal yield is 20 sacks.

Savings help farmers cope

Oxfams partner RACHA began organizing Saving for Change groups in Deins village in 2012. These groups combine their modest savings, loan each other money, and charge low interest rates. In 2015 Dein says he decided to join a Saving for Change group because he could see his neighbors had money to renovate their homes, send their children to school, and buy new motorbikes.

Dein says he likes the low interest rates, and the ease with which he can get a loan. If I borrow money from some other micro-finance institution, I have to pay a higher interest rate, and I need legal documents like a land title for the bank, Dein says.

Oxfams Saving for Change program in Cambodia is now reaching 140,476 people, 80 percent of whom are women.

To cope with the drought, and particularly the difficulty transporting water, Dein borrowed $250 from his Saving for Change group to buy the pipe and pump to bring water from the pond 800 meters away from his home.

I have to pay back $5 in every saving meeting, Dein says, adding that with the extra time he now has he can focus on making money for supporting his family and paying back the loan and interest to his Saving for Change group. I am planning to borrow another $125 to invest in raising pigshellip; I want to raise 9 to 10 pigs, and Ill use the money to buy feed for them, Dein says.

Read more stories updates about

Food, farming, and hunger, Economic well-being



In this tough economic climate many South Africans may need to borrow money, but what are your best options?

Before borrowing money, one should consider affordability and timing. If you can comfortably afford to make the minimum repayments due on the loan being considered, both now and in the event of an interest rate increase, then you are in a position to take out credit.

Private banker and professional speaker Samke Ngwenya says you should consider the criteria that banks use when assessing a credit application, a framework commonly referred to as the Five Cs of credit.

  • Capacity - Does the individual have the capacity to take out and service additional credit?
  • Collateral - Is this loan secured or unsecured?
  • Capital - Is the consumer putting forward some of their own money towards this transaction?
  • Conditions - What are the personal and economic conditions?
  • Character - What is the consumer's repayment profile?

Ngwenya adds that credit should never be used to maintain your lifestyle. "If you are taking out credit for disposables or luxuries then you shouldn't be borrowing money."

What are your credit options?

Unsecured debt

Ngwenya says the advantage of unsecured credit such as personal loans, overdrafts and credit cards is that they are quickly accessible. However, they do come at higher interest rates, meaning they're relatively more expensive forms of credit.

"As a matter of principle, unsecured or consumption loans worsen a consumer's financial health as they have higher monthly repayments, are more risky as there is no collateral or capital, and are highly sensitive to changing conditions such as the loss of income or interest rate hikes.

Secured loans and home loans

This line of credit takes longer to access, but comes with lower interest rates. Secured loans or asset finance loans are less risky as there is security, they have relatively better interest rates, and are considered "good debt" as they are used to grow the individual's asset base.