Credit ratings agency Moody's bumped the UK's bond rating from stable to negative on Friday after the country voted to leave the European Union.
Moody's said that Britain would face substantial challenges in order to successfully negotiate its exit from the EU.
"During the several years in which the UK will have to renegotiate its trade relations with the EU, Moody's expects heightened uncertainty, diminished confidence and lower spending and investment to result in weaker growth," the agency said, Reuters reports.
Moody's assigned a negative outlook to its 'Aa1' rating for British government debt.
The news follows an erratic day on the global stock markets, which lost about £1.4 trillion in value on Friday.
By the time the markets closed, the FTSE 100 had managed to claw back some of the £122 billion lost on Friday morning.
But the pound sterling fell to its lowest against the dollar since 1985.
The Government and Bank of England had warned voters the country would face a major economic hit if it left the EU after more than 40 years as a member.
Rival credit ratings agency Standard and Poor's warned before Thursday's referendum that Britain was likely to face a downgrade in its AAA credit rating if it voted to leave.
Moody's is the first ratings agency to take concrete action following today's result.
In 2013 Moody's became the first to strip Britain of its 'AAA' credit rating due to slow growth and rising public debt.
"Policy predictability and effectiveness of (Britain's) economic policymaking... might be somewhat diminished," Moody's said.
"The challenges for policymakers and officials will be substantial."
Protracted trade talks, slow growth or heightened pressures on sterling could all trigger a downgrade, Moody's said.
Supporters of Britain leaving the EU have largely dismissed warnings about the economic consequences as scaremongering, and are confident Britain will negotiate trade deals and immigration controls superior to those it already has.
But Moody's said leaving the EU was likely to leave Britain with less money to spend on public services.
"The negative effect from lower economic growth will outweigh the fiscal savings from the UK no longer having to contribute to the EU budget," it said.
"The UK government has one of the largest budget deficits among advanced economies, and lower GDP growth will further complicate the implementation of the government's multiyear fiscal consolidation plan," it added.