IT would appear that Jersey is at a crossroads and, despite all of the recent research, consultations and strategies, not many people seem to have noticed.
The Island is faced with an extraordinarily difficult dilemma and so far the debate about the choices has hardly started. So what am I talking about? Nothing less than the future of the Island’s biggest industry financial services, which provides nearly all of the Island’s income and pays for our high standard of public services. Of course for some people, even raising such an issue is close to heresy. To question the future of finance could damage confidence and confidence is all important in the finance game.
It is also sometimes easy to upset the finance sector, which is very sensitive about its image in the Island and constantly worries about not being truly appreciated. In Guernsey, for example, the association that represents banks and other financial institutions even went so far as to pay for an advertising campaign during the recent elections emphasising how important finance is to everyone in the Island. It pointed out, for example, that much of the business done by window cleaners, who are not normally considered part of the finance sector, comes from servicing banks and the private homes of bank managers and their staff.
The finance industry in Guernsey was particularly worried about the election producing a States that was anti-business and I wouldn’t mind betting a similar campaign will be launched in Jersey as our election approaches.
So it’s a sensitive subject, but just because it’s patently obvious that Jersey is totally dependent on the finance industry doesn’t mean that we shouldn’t be considering a future without it. We shouldn’t plan to hasten its demise – in fact, quite the reverse: we must do what we can to ensure its continuing prosperity. But the dilemma facing the Island that I’m talking about is how far can we go in ensuring its future?
The question that has to be answered is whether the Island can jump through enough hoops to remain in the financial services game which is dramatically different to the one when the Island was able to establish a reputation as a leader. Perhaps it’s no longer a game where a small jurisdiction with limited resources can compete.
As the recent research conducted by the London Business School shows, there is an enormous amount of competition among international finance centres. Many of them are envious of the position Jersey has managed to achieve, and some will not be able to establish a reasonable market share in a highly competitive market. Others are spending millions to make sure that they do, while Jersey spends peanuts.
As tax is no longer a subject mentioned in polite society, the most important differentiator separating the men from the boys in financial services will be expertise. Any finance centre can make itself fiscally attractive almost at the stroke of a pen, and this used to be Jersey’s main claim to fame. That’s not such an important attraction any more because all centres appreciate they have to be tax neutral just to be in the race. The winners are those that have the expertise and the people to provide the right products and services that clients want. That requires huge investment and a lot of people. So can tiny Jersey compete?
What distinguishes most of our competitors identified by the London Business School is that they are generally large countries with squillions of pounds to spend and few concerns about immigration. They don’t have some of Jersey’s advantages and many of them would love to have Jersey’s reputation and standing in this business. But others are investing huge sums to ensure that they have what it takes to be a significant player. A tiny, crowded island is going to find it difficult to compete against these bigger jurisdictions with money to invest and where our traditional benefit of low taxes is no longer the crucial factor.
There’s nothing very much new in any of this, of course, and those in the finance sector are well aware of the problem. The question is, can we do anything about it? The obvious answer is yes: we can try and match the investment that our competitors are making. That means spending a lot more than we have up to now and that’s not likely to go down well with the penny pinchers and those who already make out that taxpayers are hard done by because of the profligacy of the States.
Then we will also have to match the efforts being made to improve the skills available to the industry. That’s also going to be difficult in Jersey where no-one wants to see a huge increase in immigration and where the record for developing home-grown talent is patchy at best. I see that the idea of a business school for the Island has been resurrected and perhaps this time something will actually happen. But the Skills Executive has only just started its work and it’s likely to be years before we see any significant results.
So it’s going to be tough for our biggest industry, and perhaps the time is approaching where we have to admit that we can no longer compete and that what made Jersey a success in the past is no longer enough.
But don’t panic, it’s not likely to happen soon. Jersey is a mature finance centre which has achieved critical mass, and it has a lot going for it. Even the most pessimistic observer wouldn’t claim that this was about to change in the next few years. It’s a bit more difficult to see what will happen in, say, ten years or more. That’s a long time away, of course, although not so long that we shouldn’t be thinking about it now. It’s also the timescale that some of our competitors, such as Switzerland, are using in their planning.
There’s little doubt that we will have to put in much more effort to make sure the Golden Goose survives even in the short term. But we have to make some decisions now for the longer term as well. We are at a crossroads where we have to decide whether we can raise our game even further. That means investing even more to ensure that some of the Golden Eggs actually hatch.
Peter Body is editor of
Business Brief magazine
Article posted on 27th May, 2008 - 3.00pm
Do we want to be at this crossroads?
IT would appear that Jersey is at a crossroads and, despite all of the recent research, consultations and strategies, not many people seem to have noticed.
The Island is faced with an extraordinarily difficult dilemma and so far the debate about the choices has hardly started. So what am I talking about? Nothing less than the future of the Island’s biggest industry financial services, which provides nearly all of the Island’s income and pays for our high standard of public services. Of course for some people, even raising such an issue is close to heresy. To question the future of finance could damage confidence and confidence is all important in the finance game.
It is also sometimes easy to upset the finance sector, which is very sensitive about its image in the Island and constantly worries about not being truly appreciated. In Guernsey, for example, the association that represents banks and other financial institutions even went so far as to pay for an advertising campaign during the recent elections emphasising how important finance is to everyone in the Island. It pointed out, for example, that much of the business done by window cleaners, who are not normally considered part of the finance sector, comes from servicing banks and the private homes of bank managers and their staff.
The finance industry in Guernsey was particularly worried about the election producing a States that was anti-business and I wouldn’t mind betting a similar campaign will be launched in Jersey as our election approaches.
So it’s a sensitive subject, but just because it’s patently obvious that Jersey is totally dependent on the finance industry doesn’t mean that we shouldn’t be considering a future without it. We shouldn’t plan to hasten its demise – in fact, quite the reverse: we must do what we can to ensure its continuing prosperity. But the dilemma facing the Island that I’m talking about is how far can we go in ensuring its future?
The question that has to be answered is whether the Island can jump through enough hoops to remain in the financial services game which is dramatically different to the one when the Island was able to establish a reputation as a leader. Perhaps it’s no longer a game where a small jurisdiction with limited resources can compete.
As the recent research conducted by the London Business School shows, there is an enormous amount of competition among international finance centres. Many of them are envious of the position Jersey has managed to achieve, and some will not be able to establish a reasonable market share in a highly competitive market. Others are spending millions to make sure that they do, while Jersey spends peanuts.
As tax is no longer a subject mentioned in polite society, the most important differentiator separating the men from the boys in financial services will be expertise. Any finance centre can make itself fiscally attractive almost at the stroke of a pen, and this used to be Jersey’s main claim to fame. That’s not such an important attraction any more because all centres appreciate they have to be tax neutral just to be in the race. The winners are those that have the expertise and the people to provide the right products and services that clients want. That requires huge investment and a lot of people. So can tiny Jersey compete?
What distinguishes most of our competitors identified by the London Business School is that they are generally large countries with squillions of pounds to spend and few concerns about immigration. They don’t have some of Jersey’s advantages and many of them would love to have Jersey’s reputation and standing in this business. But others are investing huge sums to ensure that they have what it takes to be a significant player. A tiny, crowded island is going to find it difficult to compete against these bigger jurisdictions with money to invest and where our traditional benefit of low taxes is no longer the crucial factor.
There’s nothing very much new in any of this, of course, and those in the finance sector are well aware of the problem. The question is, can we do anything about it? The obvious answer is yes: we can try and match the investment that our competitors are making. That means spending a lot more than we have up to now and that’s not likely to go down well with the penny pinchers and those who already make out that taxpayers are hard done by because of the profligacy of the States.
Then we will also have to match the efforts being made to improve the skills available to the industry. That’s also going to be difficult in Jersey where no-one wants to see a huge increase in immigration and where the record for developing home-grown talent is patchy at best. I see that the idea of a business school for the Island has been resurrected and perhaps this time something will actually happen. But the Skills Executive has only just started its work and it’s likely to be years before we see any significant results.
So it’s going to be tough for our biggest industry, and perhaps the time is approaching where we have to admit that we can no longer compete and that what made Jersey a success in the past is no longer enough.
But don’t panic, it’s not likely to happen soon. Jersey is a mature finance centre which has achieved critical mass, and it has a lot going for it. Even the most pessimistic observer wouldn’t claim that this was about to change in the next few years. It’s a bit more difficult to see what will happen in, say, ten years or more. That’s a long time away, of course, although not so long that we shouldn’t be thinking about it now. It’s also the timescale that some of our competitors, such as Switzerland, are using in their planning.
There’s little doubt that we will have to put in much more effort to make sure the Golden Goose survives even in the short term. But we have to make some decisions now for the longer term as well. We are at a crossroads where we have to decide whether we can raise our game even further. That means investing even more to ensure that some of the Golden Eggs actually hatch.
Peter Body is editor of
Business Brief magazine
Article posted on 27th May, 2008 - 3.00pm