STAFF shortages, which give businesses no other option but to innovate and automate, could be boosting productivity in the Island, the Economic Development Minister has said.
Deputy Kirsten Morel spoke to the JEP following the release of Statistics Jersey’s latest report, which measures how the Island’s economy is faring.
The report showed that overall labour productivity had increased by 5% in 2022. While this is not as high as the 7.8% rise in 2021, the productivity of the economy is still going up, driven, said the report, by increased profits in finance – helped by rising interest rates – which contributed to a 22% jump in productivity within the sector.
After 14 consecutive rises, interest rates are now at 5.25%, although in a surprise move last month, the Bank of England decided not to raise the base rate further following an unexpected drop in UK inflation.
However, excluding the financial sector, overall productivity across the rest of Jersey’s economy fell by 4%.
Agriculture, forestry and fishing (down 11%) and utilities (down 9%) all saw significant decreases in productivity.
Deputy Morel said he was ‘‘not entirely surprised’’ by the overall 2022 increase.
He explained: ‘‘We knew this would happen, because banks are now getting a return from increased interest rates. We always knew the productivity of banks would increase as a result of that. But that part is out of our control.
‘‘What I want to build is structural productivity increases across the economy, so that the whole economy becomes more productive and is not relying on bank interest rates.
‘One of the reasons for increases in the financial and other sectors may be staff pressures. Because there are such strong staffing pressures, businesses are potentially being forced to automate, to redesign processes which make themselves more productive working with fewer people.’
Deputy Morel added that he “genuinely hoped” the figures were the sign of continued improvement, but that the “economic gains we need to make over the next 15 years are significant and this is definitely not the time to take our foot off the pedal”.
The Future Economy Programme, due to be released later in October, will set out how the Island can retain and further increase its productivity so that Islanders can enjoy the same standard of living in 2040, as the working-age population decreases.
The latest census found that the “dependency ratio” in Jersey had risen to 52%. This means there were fewer people of working age and paying taxes than there were non-working-age people, which has widespread knock-on implications for both the economy and health and social care.
After a recent survey revealed that a third of workers in the Channel Islands found their workload unmanageable, Deputy Morel and the Island’s digital lead, Tony Moretta, said that technology, including artificial intelligence, was the answer to pressures on the workforce and increasing productivity.
In response to the latest report, Mr Moretta said: “Companies have not been able to employ the staff and have been investing in technology to work on that.”
In particular, he said that regtech – technology used by companies to comply more efficiently with regulations – had helped to speed up processes, such as customer onboarding, anti-money-laundering regulations and verifying digital identity, which had previously been “very labour-intensive”.
“Where people complain that they’re having to take on additional work for a job the company can’t fill anyway, this is where technology comes in,” said Mr Moretta, adding that while it was ‘‘expensive and difficult’’ to find staff in Jersey, “the upside is that it forces companies to innovate, and do more work and make more profit with small teams of people”.
Factbox: How is labour productivity measured?
This figure is measured by output per person and rose from £80,000 per FTE (full-time equivalent) to £84,000 last year.
The report:
Statistics Jersey’s latest report also showed that Jersey’s GDP, which refers to the total market value of all goods and services produced, had increased by 5.9% in real terms when compared to 2021.
The figure – £5.761bn – was also 5% higher than in 2019, the last pre-pandemic year.
Again this was driven by financial activities, particularly as a result of greater income within the banking sector.
Treasury Minister Ian Gorst explained that this was influenced by the rise in interest rates, which can improve a bank’s profit margins – in turn boosting the “productivity and profitability” of the finance industry.
He said that the report showed the Island’s economy had recovered “strongly” from Covid, although he noted that this did not apply equally to all sectors.
“Our economy did not do as badly as others during Covid, partially due to financial services and the industry’s ability to adapt to remote working.
“I think we can expect financial services to continue to perform strongly,’’ he continued, adding that interest rates could fall but that it was “generally accepted” that any drop would not be “substantial”.
