The UK's credit rating was cut by major credit agency Moody's.
The investor service downgraded the country's long-term issuer rating to Aa2 from Aa1 over concerns that Brexit could hit the economy at a time when the government's debt reduction plans are already behind schedule.
Moody's said that the government's approach to public finances was "increasingly in question" and the the debt burden is likely to rise.
It said that "the government has yielded to pressure and raised spending in several areas". Meanwhile "revenues are unlikely to compensate for higher spending."
The "increasingly apparent challenges" of Brexit also dragged down the rating, with the firm saying it no longer expected a replacement free trade deal to be negotiated.
Downing Street said the firm's outlook was "outdated".
Moody's said it had come to the decision to change the rating earlier this week, before announcing it yesterday evening, meaning it was not linked to Prime Minister Theresa May's speech Florence speech on Brexit yesterday.
But a representative for the agency told the BBC's Today programme that the forecast was still up to date "in terms of what we think is going to happen".