Brexit clarity sees island’s credit rating moved to stable
THE credit rating agency Standard & Poor’s has affirmed its long- and short-term sovereign credit rating for Guernsey at AA- and A-1+ respectively, both solidly investment grade.
Much like a personal credit rating, the island’s credit rating represents its ability to meet its financial commitments.
The report considered Guernsey’s strong economy and financial institutions.
‘Our ratings on Guernsey are based on our view of the island’s strong and flexible institutions, wealthy economy, and considerable fiscal buffers,’ the agency said.
‘These strengths are offset by the external risks to Guernsey’s economy and policy-making framework, and its lack of meaningful monetary flexibility.’
Guernsey’s outlook rating was increased from negative to stable in light of greater clarity regarding Brexit.
‘In the UK’s December 2019 general election, the Conservative and Unionist Party won a sizeable parliamentary majority which we believe in turn would afford the government more room to engage with the EU over the details of their future relationship.
‘With the UK moving to the next phase of negotiations with the EU, we anticipate immediate risks to Guernsey as having dissipated.’
The agency qualified its positivity by warning that the island’s financial industry was not immune to uncertainty.
‘The level and terms of the UK financial services sector’s future access to the EU are still likely to affect Guernsey’s corresponding sector, as will changes in UK taxation and regulation of the sector.’
The assessment presumed real GDP growth of 1% a year from 2020 to 2030.
Gavin St Pier, president of the Policy & Resources Committee, said the ratings confirmed that Guernsey was financially healthy.
‘We are pleased that S&P has confirmed our own assessments that Guernsey continues to be a fiscally, economically and politically stable jurisdiction. This reflects the island’s economic performance over the last year or so.
‘The assessment also reflects the important work undertaken during the Brexit process to project our own stability in contrast to the UK’s instability and to ensure Guernsey was prepared for any and all outcomes.’
He said the States will continue to work closely with the UK government to ensure Guernsey’s interests are promoted and protected.
Despite the positive outcome, the report warned that attitudes towards the island’s tax policies remained a real risk.
Deputy St Pier said the States was actively managing the island’s international reputation.
‘As ever, we also remain committed to active and constructive engagement with the international community on matters of taxation and transparency.’