Brexit is creating a high level of uncertainty for the island, according to credit agency Moody’s.

Moody’s praised the Isle of Man’s high wealth levels, economic resilience and very strong public finances, allowing it to retain its Aa2 credit rating.

But Sarah Carlson, senior vice president for Moody’s, warned: ’Despite the Isle of Man’s strong underlying growth prospects, the UK’s decision to exit the EU creates a high level of uncertainty for the island.

’We expect the economic impact of Brexit to be manageable but negative on balance for the Isle of Man, both through direct channels but also indirectly through our lower growth assumptions for the UK.’

Buoyant

Moody’s report says that for now, economic activity remains buoyant, with an unemployment rate of 0.7% as of June 2018 and a business confidence survey showing broad optimism among nearly all sectors of the island’s economy.

However, the credit agency expects growth to slow slightly compared to the average of the past decade, reaching about 3% in real terms this year and next.

And it said that although offshore financial services are less important to the economy now than they were a decade ago, the island remains vulnerable to global and regional tax co-ordination efforts.

Large exposure to the financial services sector remains the main source of risk, said Moody’s.

But the banking sector is well-capitalised and ’asset-quality pressure’s are mitigated by the small size of the total loan book.

Moody’s downgraded the Isle of Man’s credit rating from Aa1 to Aa2 in October last year, in line with the UK’s rating.