The UK has lost its top AAA credit rating for the first time since 1978 on expectations that growth will "remain sluggish over the next few years", BBC News reports.

The ratings agency Moody's became the first to cut the UK from its highest rating, to Aa1.

Moody's said the government's debt reduction program faced significant "challenges" ahead.

Chancellor George Osborne said the decision was "a stark reminder of the debt problems facing our country".

"Far from weakening our resolve to deliver our economic recovery plan, this decision redoubles it," he added. "We will go on delivering the plan that has cut the deficit by a quarter."

The UK has had a top AAA credit rating since 1978 from both Moody's and S&P.

Shadow chancellor Ed Balls said the decision was a "humiliating blow to a prime minister and chancellor who said keeping our AAA rating was the test of their economic and political credibility".

In announcing the ratings cut, Moody's cited the "challenges that subdued medium-term growth prospects pose to the government's fiscal consolidation program, which will now extend well into the next parliament".

It added that the UK's huge debts were unlikely to reverse until 2016.

"The main driver underpinning Moody's decision to downgrade the UK's government bond rating to AA1 is the increasing clarity that, despite considerable structural economic strengths, the UK's economic growth will remain sluggish over the next few years due to the anticipated slow growth of the global economy and the drag on the UK economy," Moody's said.

But it added that the outlook for the UK is "stable", meaning it sees no further downgrades in the near future, and added "the UK's creditworthiness remains extremely high".