Recent coverage in our local press following the States of Jersey GVA and productivity report, could lead you to believe Jersey's finance industry is in decline. The fact is, it's not.
Unfortunately, GVA numbers are something of a blunt instrument when evaluating the progress or otherwise of an economy with a strong leaning to financial services. GVA figures are heavily influenced by the general level of interest rates, so if interest rates are lower, GVA will generally be lower. If interest rates rise, then over time, GVA is likely to rise.
The way these figures are calculated is statistically accurate. However, they are of limited value when it comes to working out what's really happening and the future direction of Jersey's finance industry.
Before I make it clear what else we can look at to determine the future direction of our industry, I'd like to point out a few stats from the report which may not have come across clearly in recent coverage.
- GVA actually went up by £30m in Jersey;
- Salaries, including benefits, are up in Jersey (up 9% compared to 2016)
- Bonuses are up in Jersey (up 12% compared with 2016)
Plus, labour market figures show employment is up 2.2% compared with 2016. All of these indicators point to a positive knock-on effect for government tax revenues.
The year 2007 is a reference point often used in these statistical reviews; it was when productivity was at an all-time high around the world. We now know, with the benefit of hindsight, that level of productivity was unsustainable.
We are a forward-thinking (not backward looking) industry. Our finance industry continues to be the driving force in Jersey's economy, with strong employment growth and increased expenditure on local goods and services.
In fact, employment in our finance industry set to outstrip all-time highs (a recent survey of our member firms has seen buoyant levels of business confidence manifested in recruitment intentions that will give rise to [a further] 700 new jobs over the next three years), young people in particular, should have confidence in joining almost 3,000 other Jersey school leavers and graduates who have found their first job in finance over the last decade.
So, it's actually a very positive outlook for our Island.
Productivity needs to be set in context. In a global context, the reality is that a combination of a waning productivity boom, the after-effects of the worst financial crisis in 300 years, and a digitisation dividend yet to be fully realised, has weighed heavily on western economies.
Statistics are valuable indicators, just like diagnostics are for a car engine. Sometimes, though, it is very helpful just to lift the bonnet, and to see what is really going on.
Looking to the future, in a global context, we can expect to see interest rates rise as a result of dollar rate rises in 2018, and with them GVA and productivity.
So, what can we look at to better understand our future direction? In my view, more helpful indicators, but by no means the most important metrics to our Island society, are:
- social capital;
- sustainable growth, and
- tax receipts.
These indicators are all on the up for Jersey. In fact, just today the quarterly Jersey Business Tendency Survey results show our Island's future employment outlook is positive. This was strongly driven by the finance sector. 86% of the companies surveyed expect increased profits and two‐thirds (64%) expect to increase employment in 2018.
We're proud of the positive role the finance industry plays in our community and the impact on the future prosperity of our Island.
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