A survey carried out by Jersey Finance and KPMG has outlined that the Island’s largest industry has not escaped the economic impact of Covid-19, with more than 50% of firms indicating a fall in profits of 5% or more this year.
A quarter of firms have reported ‘cashflow issues’, while many companies are planning pay-freezes and not to award bonuses this year.
The report says that 5% of firms are looking at redundancies, a quarter are freezing recruitment and only 45% are confident in their ‘resilience and ability to work through the crisis’ this autumn.
It adds that potential resolutions include government support being extended so that small finance firms have their staff wages co-paid from the public purse, as well as ITIS and social security deferrals or write-offs for certain employees.
Under the co-funded payroll scheme, the government has been paying 80% of staff wages, up to a maximum of £1,600, for struggling firms. Employees earning more than £4,558 a month do not qualify for support.
But in response to the report, Economic Development Minister Lyndon Farnham that the scheme is for the ‘hardest hit’ businesses and indicated it was unlikely to be extended to the finance sector, which has shown ‘resilience’. (Full story in today's JEP)
In his summary, Jersey Finance chief executive Joe Moynihan said the latest survey indicated greater difficulties in the sector than a similar report produced earlier in the year. He said: ‘It has become clearer there is greater pressure on employment than in the first survey with businesses leveraging measures such as unpaid leave, failing to replace leavers, some considering redundancies and a significant majority indicating no or limited bonuses and pay rises at the end of their financial year.
‘During the lockdown, 11% of companies imposed the use of unpaid leave while 31% of companies anticipate imposing use of unpaid leave in the next six months.’
Speaking to the JEP, Mr Moynihan said that it was ‘no surprise’ that the current circumstances had created uncertainty in the sector, with a global economic downturn looming.
‘While of course any indication of jobs in the finance sector being impacted is deeply regrettable, the number of companies indicating that they are considering redundancies or recruitment freezes is, fortunately, relatively low with varying representation from all sectors,’ he said.
‘Many firms will have a more cautious outlook at this time due to the significant disruption the pandemic has forced on their traditional commercial operations and we will not be able to assess the full economic impact on the industry in the short term. It is fair to say, however, that the diversity of our financial-services industry means that sectors have had different experiences during the pandemic with some more positive than others.’
Mr Moynihan said that the sector was ‘resilient, diverse and has a good track record in adapting’.
He added that any extension of the payroll support scheme would require ‘careful consideration from government’ and the industry would continue to input into its economic recovery plan.
The report indicated some positives, including 70% of respondents reporting remote working as successful, while 88% of firms were confident that their cashflow would cover their immediate expenses.