In addition to his more widely publicised comments about forthcoming economic ‘turbulence’ and the post-Brexit ‘rollercoaster’, the UK Chancellor, Philip Hammond, also told the Conservative Party conference in Birmingham this month that business hates uncertainty. While commentators may be divided in their prognoses for the future of the economy and the effects of Brexit, very few will disagree with that.
Jersey’s financial services industry has been built on a promise of political and economic stability for businesses and investors: a promise we have kept for more than half a century. Reliability has been the key driver that has kept us at the forefront of global finance these past 50 years and more. We have prudently managed our finances, and remained debt-free with substantial reserves, and have still been able to pursue a policy of balanced budgets.
The new normal?
In an increasingly globalised world, many believe that the ‘new normal’ is constant change, and that the one predictable factor is uncertainty. I think that rather overstates the case, because one cannot have progress without change.
It is undeniable that we have just experienced one of the most extraordinary summers in recent British political history, and there will inevitably be more surprises to come. The Brexit vote has ushered in a period of political and economic uncertainty that will continue at least until the UK’s exit from the EU is complete, and probably beyond. According to the timetable set out by Prime Minister Theresa May, the exit should be by mid-2019, unless all EU Member States agree to an extension, which is thought to be unlikely. We still do not know what line the UK government will take in relation to the EU Single Market or the European Customs Area. It seems from the Prime Minister’s remarks, however, that that there will be controls on immigration from Europe.
This political turbulence has occurred at a time when, globally, traditional business models across many industries have been subverted by digital methodologies (Uber and Airbnb being two conspicuous examples). Simultaneously, social cohesion is being tested in many European countries; the seemingly endless flow of migrants from blighted and economically deprived countries outside is yet another threat to European stability. Add to this the divisiveness of the US Presidential election and, closer to home, the threat from political extremists in next year’s French Presidential and parliamentary elections, as well as Germany’s federal elections in September, and we have a bubbling pot of Brexit uncertainty.
Jersey’s privileged position
It may appear a daunting picture, but we are better prepared than many others to cope with the instability resulting from all these challenges. Jersey is in a relatively privileged position. We may even find that in this changing landscape we are able to forge new relationships with existing and, as yet, undiscovered partners to the Island’s advantage. The latest economic assumptions from our Fiscal Policy Panel, the independent panel of economic experts that advises the Government of Jersey, were not unfavourable. They anticipated a slight downturn in our economy in the short term but the Panel judged our planned approach to the new circumstances to be appropriate. It is true that the proposed Health Charge was rejected, and other sources of funding will have to be found to balance the books. But the bulk of the Mid Term Financial Plan has been approved.
In his report on the 2015 annual accounts, the Minister for Treasury and Resources underlined the strength of Jersey’s balance sheet. This is important because it places the Island in the enviable position of being able to maintain confidence and security for the future while still having the flexibility to invest in priority areas. The balance in our Strategic Reserve stands at more than three quarters of a billion pounds.
We should not be complacent, but we are still able to deliver on that promise of political and economic stability. We are a “third country” which is already outside the European Union, and in that respect little will change. There will be many challenges ahead, but we can state with confidence that we have a clear idea of where we want to be. We are a beacon of relative stability.