The British Government is coming under increasing pressure after credit ratings agency Moody's Investors Service downgraded its bond rating one notch from the top AAA to AA1 last Friday.
Moody's said sluggish growth and rising debt were weakening the country's medium-term outlook.
Yesterday the opposition Labour Party attacked the government's economic policy but the ruling coalition said it was "making progress".
Shadow chancellor Ed Balls said the downgrade was a "humiliating blow", and urged the government to act fast to "kick-start our flatlining economy".
But Chancellor George Osborne said the government would continue taking "tough measures" to deal with the deficit.
Osborne said the blow only redoubled his resolve "to deliver our economic recovery plan," based on deep spending cuts.
Moody's said "subdued" growth prospects and a "high and rising debt burden" were weighing on the British economy.
The agency said rising debt meant "a deterioration in the shock-absorption capacity of the government's balance sheet, which is unlikely to reverse before 2016."
It said, though, that "the UK's creditworthiness remains extremely high," and its outlook was stable.
For the British government, the move was unwelcome but not unexpected. All three of the big rating agencies - Moody's, Standard & Poor's and Fitch - had placed Britain's rating on negative watch, as the economy continues to struggle.
The Conservative-led government is cutting 50 billion pounds ($80 billion) in spending through 2015 in a bid to slash the national debt, which stands at more than one-trillion pounds or over 70 per cent of GDP.