Shrinking economy down to finance sector decline

The Institute of Directors said Guernsey's economy has underperformed compared to Jersey and the UK

A stuttering finance sector is responsible for the fact Guernsey's economy shrunk 2% in real terms in 2023, according to a group of senior business leaders.

Richard Hemans, economic lead for Guernsey's Institute of Directors (IoD), said the island's economy had declined for the first time since the pandemic and had underperformed compared to Jersey and the UK.

Mr Hemans said the main reason for the drop in Guernsey's gross domestic product (GDP) was a 3% decline in the finance sector.

He said: "When the island's finance sector underperforms, then the island's economy also suffers."

"If the economy is contracting then we're all feeling a little bit poorer," he said.

Initial figures released this week by the States indicate Guernsey's GDP is 0.6% larger than in 2019, whereas Jersey's is estimated to have risen 5% over the same period.

There were some "positive notes", he said, with some parts of the finance sector growing in 2023, such as insurance (by 17%) and funds (8%).

Tackling the deficit

Mr Hemans said despite some buoyant sectors in other parts of the economy, such as hospitality and admin, the size of the finance sector which makes up 40% of the island's economy, meant the States needed to prioritise supporting it.

He said: "To close this gap [to Jersey], Guernsey must focus on pro-growth policies, similar to those of the new UK Labour government. "

The States' admission of a possible £24m deficit meant it was important for the island to live within its means, Mr Hemans said.

He said: "We need to make sure our public finances are sustainable. We need to make sure that our income is matching our expenditure."

He said the States had four options to tackle the deficit: raising taxes, spending less, borrowing or growing the economy and "clearly the preferred measure has to be growth".

"We need to invest in the finance sector, that is our golden goose", he said.