More than £27 billion was wiped off the value of London’s top-flight index as a sell-off ripped through global markets.
By Thursday of last week markets globally had already bounced back, but on Friday the jitters returned, with widespread share sell-offs in Asia, the US and Europe.
Asked for his views during a lunchtime presentation last week, Martin Beck of the EY ITEM Club described the reason widely quoted for the sell-offs – the potential rise in US interest rates – as ‘slightly odd’.
If the correction proved to be short term, there would be few concerns, he observed. However, if the correction was longer term, it could adversely affect the value of pension funds and depress demand. ‘I do not think the economic consequences will be serious,’ said senior economic adviser Mr Beck, a regular presenter in the Channel Islands.
Focusing specifically on forecasts for the islands, he said that there was currently no ‘timely’ data from which to draw meaningful conclusions, with the GDP figures not yet available even for 2016.
The economist said indications showed that Jersey had outperformed Guernsey in recent years, but not as strongly as the UK.
He also suggested that in the event of another general election, a Labour Party could be an ‘upside’ for the islands, even though leader Jeremy Corbyn is ‘not keen on tax havens’, with numbers of high net worth individuals relocating offshore.
Although Islanders had not been able to vote in the Brexit referendum, the economy would undoubtedly be driven by the UK, he added. ‘Financial services could be upside if the government there is pro-City, but if the City suffers, that could be bad news,’ said Mr Beck.
In general terms, 2018 was likely to bring a fallback in the inflation rate, with consumers more cautious and subdued investment, although with good levels of profit as sterling currency strengthened. ‘I do not think people should be too despondent,’ he added.