Fund manager warns on UK triple-A credit rating

LONDON, Jan 8 (Reuters) - A leading British fund manager warned on Friday Britain risked losing a top credit rating without firm action to reduce its budget deficit.

Standard & Poor's has said it could downgrade Britain's AAA credit rating over concerns about the credibility of government plans to tackle the deficit -- set to top 12 percent of gross domestic product this year.

'I think there is a decent chance that we will be downgraded and certainly it's a near certainty if we don't, in the wake of the next election, properly deal with the deficit,' Invesco Perpetual Head of Investment Neil Woodford said in an interview on Invesco's web site. 'If we don't take the medicine, there will be a downgrade -- it's inevitable. If we do, we have a chance of escaping a downgrade.'

Woodford said failing to act swiftly on the deficit would put pressure on sterling and 'imperil the long term interests of the economy.

'The earlier and the quicker we address the deficit, the better for the medium and long term fate of the economy,' he said.

The Labour government has pledged to halve the deficit over four years and the opposition Conservatives, tipped to win an election due by June, want to move more quickly. Investors have criticised both plans because of a lack of clarity.

'My best guess is that markets will impose timetables rather than politicians,' he said.

Woodford said he was pessimistic about the economic outlook.

'I don't believe that we have the ingredients for a sustainable economic recovery,' he said.

(Reporting by Matt Falloon; Editing by Andrew Hay) Keywords: BRITAIN DEBT/FUND (UK Economics desk, [e-mail], Tel: [phone]) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.