Ratings agency Moody's has downgraded the UK's credit rating from Aaa to Aa1.

It is the first time since the 1970s that Britain has not had the top rating.

The downgrade is a huge political blow for the government, especially chancellor George Osborne, who said it was a stark reminder of the debt problems facing the country.

Moody's said the government's debt reduction program faced big challenges ahead as the British economy struggles with recession and unemployment.

The UK has enjoyed a Aaa rating since 1978 and Moody's said economic growth would remain sluggish, but added the country's credit worthiness remains extremely high.

Shadow chancellor Ed Balls said it was a "humiliating blow" to the chancellor and the prime minister who had said the Aaa rating was a mark of economic and political credibility.