Jersey credit rating downgraded following Brexit

Jersey’s credit rating has been downgraded by one notch, following Standard & Poor’s (S&P’s) post-Brexit downgrading of the UK’s credit rating.

The UK was downgraded by two notches from AAA to AA as a direct consequence of the electorate’s decision to leave the EU and the potential consequences for the City of London. Jersey has been moved from AA to AA-.

The possibility of a downgrade had been anticipated, says the States, and officers have shared its financial plans and degree of preparedness with the ratings agency.

The downside risks to the economy are identified in the Medium Term Financial Plan, as are the resulting risks to income collection. S&P notes these but expects Jersey to show a “broadly balanced budget over 2016-2019”.

Treasury and Resources Minister Senator Alan Maclean said: “This is the best outcome Jersey could have hoped for, following the lowering of the UK’s rating by two notches. It reflects our ability to demonstrate that our plans have been based on managing risks to Jersey’s economic and fiscal performance.

“This change does not affect the cost of the island’s existing bond and it is too early to speculate on the potential impacts on the costs of any future borrowing. Even though the UK suffered a more significant downgrade than Jersey has, its cost of borrowing has actually fallen.”

In its report, S&P noted: “Jersey’s existing relationship with the EU will not be significantly affected by the exit of the UK from the EU” and that “the risks to Jersey’s financial sector and its fiscal performance are balanced by its still significant economic resilience”.

Chief Minister Senator Ian Gorst said: “It is pleasing to note that the agency’s outlook for Jersey has improved from negative to stable. S&P concluded that the risks to Jersey’s economic and fiscal performance are broadly balanced in the next two years.

“We have been planning for Brexit, we are already outside the EU and we have been successfully developing our economic and international links with countries across the globe. These facts, together with S&P’s judgement that Jersey is institutionally strong, are reflected in the minimal nature of our downgrade.”

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