S&P maintains Jersey's credit rating

Monday 30 January 2017

Standard and Poor's has maintained Jersey's credit rating of AA- , but warned about increased uncertainty and stagnating growth beyond 2017 as a result of Brexit.

S&P's report is generally favourable, noting the Island's "...strong and flexible institutions, wealthy economy and considerable fiscal buffers."

It goes on to say that: “The stable outlook reflects our view that, over the next two years, the risks to Jersey’s financial sector and its fiscal performance will be balanced by its still-significant economic resilience.”

After small economic growth in the short-term, S&P also describes  significant problems on the horizon, mainly generated by uncertainty over Brexit:

"Beyond 2017, however, we expect economic uncertainty to increase and growth to stagnate. As Brexit negotiations begin, uncertainty in the U.K.'s financial sector will result in weaker prospects for the corresponding sector in Jersey. Although Jersey's financial sector has a geographically diverse funding base, a large portion of its client base originates from U.K. referrals, which may decline if global banks diversify their European operations away from London. Weaker economic performance in the U.K. may also reduce the asset quality of Jersey banks that have material U.K. exposures, and so reduce their profitability."

Interestingly, the credit ratings agency also suggests that it doesn't actually expect Jersey's relationship with either the EU or the UK to be fundamentally altered by Brexit:

"We do not expect the nature of Jersey's institutional relationship with either the U.K. or the EU to materially change."

Treasury and Resources Minister, Senator Alan Maclean, said “This is extremely good news for Jersey, it confirms our fiscal plans are robust.  We have been able to demonstrate how Jersey’s financial sector has changed and how non-bank financial services has grown.

The Chief Minister, Senator Ian Gorst, said “This is a positive report from a globally recognised rating agency. It acknowledges Jersey’s strong economic foundations and sees the Island as having a healthy overall fiscal position.

“The agency’s report does point out that economic uncertainty in the UK could impact on Jersey. This is something we have anticipated and are planning for and it is also pleasing to note the agency’s view of our economy as remaining resilient.

“We have been able to update S&P on the work underway as a result of Brexit and they share our view that our institutional relationships with the UK and EU are not expected to materially change.”