Britain's coveted AAA credit status came under renewed pressure on Tuesday after official figures pointed to higher than expected public sector debts last month.
The government borrowed an extra £15.4bn in December, higher than forecast by most analysts and, with three months still to go, almost hitting the total forecast for the full financial year.
Unless there is a large jump in tax receipts in January, credit ratings agencies are expected to take a pessimistic view of the UK's public finances and downgrade its credit status.
Knightley said the UK's triple-A rating was under pressure and was likely to follow the US and France, which have already been downgraded.
"At first glance the cumulative budget deficit for the financial year to date appears to have shown a decent improvement this year, £78.5billion versus £99.3billion for the same period in full year 2011/12," he said.
"However, this is purely down to the transfer of assets from the Royal Mail pension fund, which was absorbed by the state. It will get a further boost when then Treasury receives the interest the Bank of England had earned on its holdings of gilts bought for its quantitative easing programme. Strip these factors out and there is unlikely to be any underlying improvement in financial year 2012/2013 versus 2011/12." (Guardian)
Knightley emphasised that the government's problems centred on a dearth of tax receipts rather than an explosion in spending.
"The disappointment has come from the tax side mainly, with income tax revenues, corporation tax revenues and VAT revenues all down on the same period for financial year 2011/12," he said.
"This highlights the weak state of the UK economy and the fact that austerity measures are failing to generate the improvement in government finances that were hoped for."