The contribution from the financial services sector in Jersey, the island’s most important industry, to the overall economy has declined 2% in 2017 as the sector continues to struggle year after year.
The latest figures by Statistics Jersey showed that the Gross Value Added (GVA) from the financial services sector continued to decline at a steady pace. Its contribution to the economy is now almost a third smaller than it was a decade ago.
“The level of total GVA of the Finance sector in 2016 was £700 million below the previous peak in total GVA seen in 2007,” the statistical body said in a report. That’s a fall of over 30% in real terms since 2007.
GVA is calculated by adding up the values of goods and services produced by firms.
The contribution of the finance sector to Jersey’s economy decreased by £30 million in 2017 compared with that recorded in 2016, “corresponding to an annual real-term decrease of 2%,” the figures show. Last year’s GVA from the finance industry was of £1.740bn.
A deeper look into the finance sector numbers reveals that the banking industry was mostly driven by the island’s banking industry. It dropped 5%, following a 6% decline in 2016. The sub-sector’s GVA, taking into account inflation, is now roughly half of what it was before the global crash in 2007.
This sub-sector drop goes against a real-term increase of an average 1% in GVA from fund management, trust & company administration, legal and accountancy services.
However, even with this negative backdrop, the average amount of bonuses paid to finance workers increased by 12% to £6,500 in 2017.
The average amount spent on each employee, including wages, social security and benefits, also increased to £70,000, which was 9% higher than the year before.
“Since 1998, there has been an overall decline in labour productivity in Jersey’s finance sector, particularly since the economic downturn of 2007, but this trend has continued (albeit at a slower rate) in recent years,” the report said.
Jersey Finance, the body that represents the sector, told International Adviser that one of the reasons for the dwelling numbers is the uncertainty surrounding Brexit.
“The reality is that the world is very different now to what it was ten or twenty years ago. We’re finally emerging from a decade-long global economic crisis, we’re operating with far more regulation, and there is a fair amount of uncertainty, particularly in Europe, around Brexit. All that has an impact and we are not immune to it,” , Geoff Cook, chief executive of Jersey Finance, pictured left, said.
Commenting on the banking sector specifically, he added: “It’s clear that the increased requirement for regulation and information exchange has affected productivity, and we’ve seen steady growth in regulatory and compliance staff. That is of course absolutely right, these are vital roles and we want to do our business correctly here, but as non-revenue generating roles, it has inevitably diluted productivity.
While the industry struggles with the negative trend, Jersey Finance is hopeful for the future. “Our finance industry continues to be a major contributor to the Island’s economy. Firms here are positive on employment growth, with 800 more jobs in the industry anticipated over the next five years, more than 80% for local people*. In fact, the Government of Jersey Labour Market survey shows us we’re back to pre-crisis levels with employee levels up by 7.3% over the last five years.”