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Leading economists have warned that it is unlikely that Britain will retain its AAA credit rating with all three major credit rating agencies through 2013, given the economic climate and the way the UK’s finances are going.

This will be a particularly embarrassing development for George Osborne, who has repeatedly claimed that his actions have protected Britain’s credit rating after the Labour government tarnished it. However, the Labour government maintained the AAA rating throughout their tenure.

The Royal Bank of Scotland’s Ross Walker was just one of those who gave the warning: “I would be surprised if all three of the main ratings agencies had the UK as AAA by this time next year.” He was joined by Capital Economics’ senior UK economist, Vicky Redwood, who said that “It’s looking likely that the UK will lose its AAA rating next year.”

However, this may not be as much of a problem as it at first appears. The US has already had its credit ratings downgraded, but that hasn’t affected its ability to get loans from financial markets or other countries at all. It’s possible that Britain will maintain its influence in financial markets, even with the lower credit rating. Redwood claims that “this is largely just rating agencies telling us what we already know, so we doubt that financial markets will move much in response. For now, the UK’s relative safe-haven status still looks secure.” This position is backed up the Office for Budget Responsibility’s chairman, Robert Chote.

Despite all of these warnings, the chancellor appears eager to plough on with his plans. Economists, business leaders and now credit rating agencies are telling him it doesn’t work, yet he goes ahead. The real problems from this aren’t the government borrowing money though, as long as the markets still view the government as reliable. Instead, it could be the public who shoulder most of this burden as international money markets start to see UK citizens as a riskier investment. Essentially, the cost for loans to the UK public could increase.