A senior Conservative minister has warned it may take years for the UK to regain its prized AAA credit rating.
The warning comes amid fears about how the markets will today react to the weekend's shock downgrade.
Ken Clarke also predicted it would take several more years for the UK economy to get back to sensible growth.
His comments came as Business Secretary Vince Cable attempted to play down the impact of the move, dismissing it as background noise.
However, experts warned the pound could tumble further against the dollar and the euro.
Economic growth could also be hurt in the longer term because of the loss of the AAA rating, they said.
The news could scarcely have come at a worse time for ministers, as they nervously await confirmation of whether or not the UK is back in recession for the third time in five years.
Ratings agency Moody's predicted sluggish growth would dog the UK economy for years to come as it announced on Friday it had slashed the rating.
The pound fell as those markets that were still open gave their verdict on the announcement.
Labour has branded the move a humiliating blow for George Osborne.
The Tory Chancellor has repeatedly pointed to the credit rating as a sign the UK economy is in a better position than some of its rivals. Mr Osborne has insisted he will press ahead with his strategy, despite the blow just weeks before his latest Budget.
Yesterday, former Labour Chancellor Alistair Darling urged him to change tack.
His comments came as the Federation of European Employers warned the Moody's decision could have a profound impact on economic growth.
Secretary-general Robin Charter said: "The downgrading of the UK's credit status is a blow for the UK as a financial centre and the UK balance of payments is so reliant on its financial services that even a small loss in trading income could affect the value of sterling and have a major impact on GDP."
Howard Archer, chief UK and European economist at IHS Global, warned the pound would be particularly vulnerable after the downgrade.
Mr Cable admitted Mr Osborne had been eager to maintain the rating, but the reduction was largely symbolic, he said.
He said: "In terms of the real economy there is no reason why the downgrade should have any impact.
"These things do not necessarily affect the economy but they reflect the fact we are going through a difficult time."
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