Jersey Finance chief executive Geoff Cook said that ‘nothing could be further from the truth’ in response to recent suggestions that the Island’s largest sector is in decline, after economic statistics were published suggesting negative productivity and output trends over the past decade.
Mr Cook added that expected changes in the global economic climate should soon see interest rates rise prompting a recovery in the Island’s banking sector, which has been stung by a prolonged period of historically low interest rates that has squeezed its profit margins.
Figures recently published by Statistics Jersey indicated that the Gross Value Added [economic output or value of goods and services produced] of Jersey’s finance sector declined by two per cent last year and was 30 per cent lower last year than in 2007, taking into account inflation.
But in a letter to the JEP, Mr Cook said that while statistics were ‘valuable indicators’ it was sometimes important to ‘lift the bonnet’ to see what was really going on in the industry.
‘Unfortunately, GVA numbers, which are a combination of gross operating surplus and compensation, are something of a blunt instrument when evaluating the progress or otherwise of an economy with a strong leaning to financial services,’ he said
‘The GVA figures are heavily influenced by the general level of interest rates. If interest rates are lower, GVA will generally be lower, if interest rates rise then over time GVA is likely to rise.
‘The methodology, whilst statistically accurate, is of limited value in determining what is really happening and in terms of what the future direction of our industry might be.’
He added: ‘[It should be appreciated that] GVA actually went up by £30m, that employment is up, wages are up and bonuses are up, with a strong likelihood of a positive knock-on effect for government tax revenues.’
Mr Cook said that the year 2007, which is often used as reference point in statistics, was when the world saw an all-time high in financial activity which ‘proved to be unsustainable’.
He added that employment in Jersey’s finance sector was now set to ‘outstrip all-time highs’ and that young people, in particular, should ‘have confidence’ in joining the industry.
‘Matters such as productivity need to be set in context. The reality is that a combination of a waning productivity boom, the after-effects of the worst financial crisis in 300 years, and a digitisation dividend yet to be fully realised, has weighed heavily on western economies,’ he said.
‘Despite this, a recent survey of our member firms has seen buoyant levels of business confidence manifested in recruitment intentions that will give rise to a further 700 new jobs over the next three years.
‘With further dollar rate rises due in 2018, expect to see interest rates rise, and with them GVA and productivity. Helpful indicators, but by no means the most important metrics to our Island society. Social capital, jobs, sustainable growth, and tax receipts are all more important, and they are on the up.’