Is it our football or our economy that appeals to Mr Abramovich?

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If he were to get rid of some investments, he would be able to buy Jersey itself, although it's not for sale as a job lot - just piece by piece

Peter Body

It is unlikely that squillionaire Roman Abramovich had the latest Standard & Poors’ assessment of Jersey when he decided to apply for residency in the Island. So it may not have been the Island’s sparkling economy that attracted him. Personally I think it was simply his love of football that sparked an interest in Rozel Rovers.

Whatever his motivation, Mr Abramovich’s application for residence was obviously an enormous feather in the cap of the Island as a destination for high value residents, even if Jersey proves to be just one on a long list of places around the world only too ready to benefit from some of his £8 billion or so in wealth.

If he were to get rid of some of those investments, he would be able to afford to buy Jersey itself, although it’s not for sale as a job lot – just piece by piece. And as the S & P rating shows, we could do with some business from Mr Abramovich as the outlook for the economy has taken a turn for the worse.

While it is by no means disastrous, the downgrading from a stable outlook to negative for Jersey’s long-term sovereign debt shows that not everything is as rosy in the economy as our political leaders like us to believe.

The rating itself has not changed, and it is still one of the highest that S & P can award, and as the rating agency points out, the Island’s position is supported by net assets equivalent to 130% of GDP. That’s about £4.3 billion, which is almost as much as Mr Abramovich is worth.

In their report, S & P are complimentary about Jersey’s ‘healthy overall fiscal position’, ‘strong and flexible institutions’ and ‘wealthy economy’. So it’s a shame that our lacklustre and heavily dependent economy faces a lot of challenges, some of which are spelt out by S & P.

Key among them is our old friend Brexit, which is likely to be as big a disaster for Jersey as it will be for the UK. Even if the highly optimistic outcomes being peddled by some of our politicians and business leaders actually come to fruition, no one is expecting it to bring robust economic growth, at least in the short term. But a strongly growing economy is what Jersey needs and that does not mean just more jobs.

Another problem holding back prospects for growth is the lack of diversification, and the knock-on effect on the Island’s reputation which could be posed by the finance sector. The rating agency says that the Island remains vulnerable to these risks even though it was not implicated in any wrongdoing by the Panama Papers, for example.


The relatively strong regulatory and legal framework will work in our favour, S & P say, although a single scandal can have a negative impact on the whole jurisdiction. They also don’t mention other factors that can impinge on the finance sector such as the widening requirement to comply with the OECD’s BEPS ‘substance’ requirements for local companies.

Some of our industry leaders appear to believe that structures established specifically for tax purposes can have enough economic substance to meet the new requirements, but that may not be what the EU thinks, for example.

The Island is also facing challenges with the way financial services are changing. They may have adapted well to shifting markets, but the relative decline in the banking sector in Jersey has been replaced by growth in trust and company administration that is more labour intensive and less productive. As S & P point out, the GVA (Gross Value Added) per employee in Jersey’s finance sector has fallen from £191,000 in 2007 to £130,000-£140,000 in recent years.

The S & P’s projections for future growth are therefore as subdued as those of our own Fiscal Policy Panel. S & P predict the economy to have grown 1.2% in 2017, but this year economic uncertainty will set in and growth stagnate, again partly due to the Alice in Wonderland-type Brexit negotiations.

Perhaps the most telling figure in S & P’s assessment is that for real GDP growth per capita, which measures how the economy has grown compared to its population and is therefore a good indicator of the standard of living. This has been negative in four out of the past six years, during which our politicians have been telling us how well we’ve been doing. The biggest increase in recent economic output per head was 3.8% in 2014 due largely to a few large one-off transactions boosting the economy. This was followed by an increase of just 0.6% and then stagnation in GVA per capita in 2017. This year will see a predicted fall of 0.6%, then it’s minus 1.2% for 2019, 2020 and 2021. That means Jersey’s standard of living is predicted to fall by more than 5% in eight years.

Perhaps Mr Abramovich will arrive on the scene and become our Fairy Godmother or at least boost GVA per capita. We certainly need it.


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