For the first time since 1978 the UK has lost its AAA credit rating, with growth predicted to be slow over the next few years.

The drop to Aa1 came from ratings agency Moody’s, citing significant ‘challenges’ ahead for the UK government’s debt reduction programme.

Moody’s did clarify that it did not predict any further downgrades in credit rating in the future, due to the UK’s economic stability.

Chancellor George Osborne responded to the downgrade by saying: “Far from weakening our resolve to deliver our economic recovery plan, this decision redoubles it".

Shadow chancellor Ed Balls said the downgrade represented a, “"humiliating blow to a prime minister and chancellor who said keeping our AAA rating was the test of their economic and political credibility".