In a speech last week, Sir Mark Boleat said that the most likely outcome for the UK’s financial services, in the Brexit negotiations, is the ‘worst case scenario’. Progress on the big issues has been slow and the timetable has slipped. In terms of mainstream banking and insurance industries, Britain will be treated as a third country with no special access to the EU27. This would result in the loss of 75,000 jobs in the UK and £10 billion of tax revenue.
So what does Sir Mark think this means for Jersey which is closely tied to the London financial markets? ‘The impact on Jersey is not clear. Jersey on the whole should be OK because it’s not in the EU and should not be directly affected, on the other hand anything can happen and I think politicians well understand that. Clearly because Jersey is an essential part of the UK’s finance industry anything that adversely affects London could affect Jersey.’
Despite the continued uncertainty, most businesses haven’t sat around and waited. Since Prime Minister Theresa May triggered Article 50 in March of 2017, they’ve been moving various operations and getting on with forward planning. Yet, the Prime Minister is under intense political pressure without a Parliamentary majority and just the narrowest of working majorities. Could Jersey become a sacrificial lamb in political bartering, an offering to anti-off-shore MPs in return for their support?
Chief Minister, senator John le Fondré’s first public duty as Chief Minister in the Island, was at the International Banking Forum, Future of Wealth. His attendance at the event was, he said, a reflection of the importance of the industry to the Island, so is he concerned that Jersey might end up a sacrificial lamb?
‘We facilitate half a trillion of investment into Britain and that’s Jersey alone. For the Crown dependencies it’s at least double that figure. That is a good story to tell. So if that rule of thumb works and we are worth about ten billion a year to the UK Exchequer, they will have to think.’ He added: ‘We are an asset to the UK and that’s why a lot of work has been done to get the UK to understand our constitutional position and also our benefit to the UK, and at this stage we are as well positioned as we can be.’
Giving the keynote speech at the International Banking Forum was Baron Nicholas McPherson, former Permanent secretary to the Chancellor of the Exchequer (2001-2016). He thinks Jersey is good at looking after its interests and the British government likes to have a reasonable relationship with us so is unlikely to sacrifice our interest. He also believes the impact of Brexit is already being felt in the UK and most people won’t notice the effects going forward.
So, if Jersey has done all it can to put its case forward and the effects in the UK are already in play, does Lord McPherson think we are in danger of focusing too much on Brexit and missing other greater issues?
‘I certainly think Brexit is absorbing a huge amount of government attention, there are benefits and costs to that. The benefit is the government hasn’t got time to do stupid things, but the cost is that there are almost certainly other things which need attention and the most important thing for Britain, as I suspect it is for Jersey too, is how you develop the skills and infrastructure. How do you make it easy to convert the scientific ideas into economic propositions which can create jobs, wealth, income and so on and my worry is that there is not enough focus on that. In the end those things can be far more important than Brexit in terms of their impact on growth. But I just feel they’re not getting the attention.’
One of the other headline hoggers in the last few weeks, has been US president Donald Trump’s various tariff threats to China, Europe and Canada. Should we be taking more notice of storm clouds gathering across the Atlantic?
Lord McPherson is concerned: ‘If this trade war gets a whole lot worse that will have a far greater impact on the British and Jersey economy than Brexit will. You only have to look at the 1930s where there was a trade war which got worse and worse and worse as countries competed to raise tariffs and world trade really dried up and that actually, more than anything else, contributed to the slump. Free trade matters and I worry a lot about the sort of economic nationalism in America but also elsewhere.’
Christopher Davies, HSBC chief executive officer, was also in Jersey for the International Banking Forum. He’s a believer in global trade and says the banking sector is in a much better position than it was before the last financial crisis. He also said Jersey’s reputation is strong, with its key differentiator being its extremely strong governance and proactive engagement on issues such as tax transparency.
He sees potential issues, but is also positive about opportunities: ‘There is a thread of economic nationalism around at the moment, but our view would be that in the longer term demographics are going to continue to drive global economic growth. If you think about the journey the middle class have still got to go on in Asia, the ability of that money to be spent here or for people to tap into that or supply those consumers, that’s going to be a major lever for global economic growth, certainly for the next couple of decades.
‘I think there is growth going to be there in the pipeline, but we need to be careful to navigate the complexities of what might be a more demanding environment in terms of specific trade rules and tariffs and so on, in the shorter term.‘
- Geoff Cook, chief executive officer, Jersey Finance, gives his opinion on Brexit in Wednesday’s JEP
