RATING agency Moody’s has warned Boris Johnson’s victory in the race to become the UK’s next prime minister has increased the likelihood of an economically damaging no-deal Brexit.

The organisation, which earlier this month warned no deal would likely lead to a recession, said the risk of a crash out of the EU has risen.

“Any Brexit compromise now seems less likely,” Moody’s said in a report released soon after Johnson was named as Tory leader.

The pound traded lower after Johnson won the contest, with many investors expecting his leadership to usher in a new period of Brexit uncertainty.

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The pound was recently down 0.3% at $1.2440, around 1% above the 17-month lows it plumbed last week when Johnson and his rival for the leadership Jeremy Hunt both hardened their stance on renegotiating outgoing Prime Minister Theresa May’s exit deal with the EU.

The pound has fallen more than 2% this month as investors take stock of the chances of a no deal Brexit under Johnson, and is down 2.6% for the year to date.

“Seeking a meaningful change to the agreement from the EU – and then getting enough MPs to support it – will be seriously challenging,” said James Smith, developed markets economist at ING.