The rating agency dropped the UK’s grade by one notch to Aa3 which is equivalent to a double-A minus rating from rival S&P Global.

Moody’s said that the UK’s outlook was stable however, it said it believed growth would be “meaningfully weaker” than it had previously believed and that the UK’s economy had been struggling even before the pandemic struck.

The agency noted that COVID-19 is expected to weigh more heavily on the UK economy than other large developed nations, given its heavy reliance on services that require human interaction.

Moody’s also specifically pointed to what it called “the weakening in the UK’s institutions and governance”, the Financial Times reports.

It said: “While still high, the quality of the UKʼs legislative and executive institutions has diminished in recent years.”

Pat McFadden, Labour’s treasury spokesman, said the downgrade was a damaging verdict on Boris Johnson and the Conservative party’s stewardship of the UK economy. 

“It is notable that the weakening of UK institutions and governance had been picked out as part of the reason for the downgrade,” he said. “The ideological attack on our institutions being waged from No 10 is now having a direct impact on the economy.

“The prime minister should focus on securing the Brexit deal he promised rather than compounding the damage in the months ahead.” 

The Treasury said that COVID-19 had made a significant impact on public finances, but that things would have been far worse “had we not acted in the way we did to protect millions of livelihoods”.

It said its priority was to protect jobs and businesses and that “over time and as the economy recovers, the government will take the necessary steps to ensure the long-term health of the public finances”.

Sarah Carlson, an analyst with Moody’s, said the coronavirus-induced shock had brought new and considerable pressures on the UK economy.

She said: “Despite the projected recovery, we estimate a sharper peak-to-trough contraction for the UK than for any other G-20 economy.”