Isle of Man faces Moody's credit rating downgrade after Alistair Darling slashes its budget

Chancellor Alistair Darling this week cut the Isle of Man's budget by 24pc when he sharply reduced a 400-year-old customs revenue-sharing agreement.

Previously the UK gave the island an estimated £230m a year as part of the agreement, allowing the island to cut corporation tax to zero for all companies apart from financial institutions, which pay 10pc.

Thomas Amenta of Moody's said the Isle of Man's room for manoeuvre was now "substantially limited".