Credit rating agency Moody’s says the British exit from the European Union is “credit negative, but manageable.”

It says the June 23rd vote will likely take several years to complete.

“The Brexit vote is credit negative for the UK, and we changed the UK’s Aa1 long-term issuer and debt rating outlook to negative from stable,” it says in its latest credit report.

It adds that the referendum outcome “triggers a prolonged period of policy uncertainty that will weigh on economic growth, fiscal strength and policy-making predictability.”

But Moody’s says that the UK’s exit “has a manageable effect on the EU’s credit quality and we affirmed the EU’s Aaa rating and stable outlook.”

“The UK government will have to consider material trade-offs between favourable access to the EU Single Market against concessions in the areas of regulation and immigration,” the report says.

No change to EU rating

It believes that heightened uncertainty during extended negotiations will likely “dent investment inflows and confidence, weighing on the UK’s growth.”

“Substantial new tariff or non-tariff barriers to trading goods and services would adversely affect UK sectors that trade extensively with the EU, such as automotive, manufacturing and food production.”

While Moody’s also says the UK vote has not affected the credit quality of the EU, which rests principally on the credit strength of its most highly rated member states.

“We do not expect the UK’s eventual exit to affect the capacity or the willingness of the EU’s very highly rated member states to honour their obligations to support the EU,” it says.

“We therefore affirmed the EU’s Aaa rating and stable outlook.”

 “We do not expect Brexit to have major credit implications for most EU-based issuers because the UK market contributes a small share of their overall revenues. Moreover, in the event of major market volatility, the European Central Bank would provide liquidity support,” it adds.