08 July 2016
Jersey’s credit rating has been reviewed following Standard & Poor’s (S&P) post-Brexit downgrading of the UK’s credit rating. Jersey’s rating has consequently been slightly downgraded by one notch.
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 on the prospects for the City of London. This event led to a review of other sovereigns with connections to the UK, including Jersey. Consequently, following the UK’s downgrade, Jersey has been moved down one notch from AA to AA-.
The possibility of a downgrade was anticipated and officers have shared the detail of our current financial plans and high 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 also note these, however they expect Jersey to show a “broadly balanced budget over 2016-2019”.
Treasury and Resources Minister, Senator Alan Maclean, said: “This is the best outcome that 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 that “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.”
The 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.”