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Caution alongside optimism
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The evidence comes in the shape of data supplied by the States Statistics Unit. The unit’s annual survey of financial institutions show that profits in the sector increased by 75 per cent last year. This was a dramatic improvement on performance during the height of the recession.
But there are reasons to look at the headline figure more closely and critically.
To begin with the industry – or rather the various sorts of business which make up the industry – have a lot of ground to make up given the decline experienced during the recession. Secondly, last year’s profits appear to have been inflated by a small number of highly profitable transactions handled by a small number of institutions.
We should, of course, be grateful that this business came our way, but it is surely significant that the industry’s total net profit would actually have fallen by 12 per cent if the major transactions were not part of the picture.
However, despite the extent to which last year’s figures were skewed by what
appear to have been exceptional events, there are certainly reasons to be cheerful about finance and the role it plays in Island life.
Forecasts that it was poised for resurgence as conditions improved are, at the very least, plausible. In addition, finance continues to contribute vast sums in tax to the Island’s economy. It also spends freely in the Island, boosting other sectors.
We must, moreover, never forget that financial institutions are major employers. Last year’s figures indicate that more than 12,000 Islanders worked in finance and that a substantial number of school-leavers were able to find financial services jobs.
Government strategy has for many years relied on the understanding that the prosperity of finance will feed into tax revenues and into the general economy.
This happens, but we must now hope that the flows in the direction of the exchequer and Islanders in general will strengthen, mirroring the benefits already seen by finance employees, who last year enjoyed bonuses worth a total of more than £78 million.
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