18 September 2018
The Chief Minister, Senator John Le Fondré, gave the following speech at the opening of Jersey Enterprise Week 2018:
I’m delighted to have been asked to speak at the opening of the fifth annual Enterprise Week, and to take my first opportunity as Chief Minister to address the leaders of our business community.
Events like this are vital in helping local businesses focus on the issues that we will be discussing today - mitigating emerging risks, seizing opportunities, and understanding the wider implications for our island economy.
I want to congratulate Jersey Business for their continued success in organising this event, which is evident from the size and diversity of the audience here today.
Jersey has long been a centre of international trade.
As a small island with finite resources, we have relied upon trade in goods and services internationally to increase our prosperity and to improve the quality of life for Islanders, from fishing the cod banks of Newfoundland, to the export of our unique and world-famous Jersey Royal potatoes and Jersey cows; and from the knitting of the ubiquitous Jersey, to the development of a thriving financial services sector, the common theme is our adaptability and innovation.
Through consecutive generations, the story of Jersey’s successful economy is the story of our ability to adapt to new challenges.
Today, those challenges present themselves in myriad ways.
Brexit, globalisation, technological developments and political disruption pose previously unimagined risks. But they also create real opportunities, if we’re prepared to seize them.
Am I being overly cautious in highlighting, at the outset, the risks facing island businesses?
No. Partly, because I’m an accountant and because it’s second nature, but also because I believe that we need to have a frank discussion of the risks in order to be properly prepared.
What does our economy look like today?
Our island finances are strong. The labour market continued to strengthen in the second half of 2017, with record high employment in December.
Equally, unemployment is at the lowest level since December 2008 and marks an 18 per cent fall from the same time last year. Our latest Business Tendency Survey showed employment intentions and business activity expectations are strong, with employment expected to grow in both the finance and non-finance private sectors. These are all positive signs, but there is a risk that they mask some significant issues that are a real economic threat.
Overall, Jersey’s economy as a whole saw little, if any, growth in 2017.
The Fiscal Policy Panel’s estimate has been downgraded from 1% in March 2018 to a now essentially flat profile for the year. Headline inflation in Jersey for the year to June was 4.5%, significantly higher than the 3.2% in the year to March 2018.
We need to do all we can to prevent inflation from rising more sharply
- by providing a balanced budget
- by continuing to strengthen competition
- by developing the skills, innovation and enterprise that attract and serve inward investment
In broader terms, while the global economy has remained resilient, we’re in a period of uncertainty, where growth prospects are becoming more uneven. These risks now threaten the short term as well as the medium term.
In such circumstances, we can’t be complacent that what has served us so well before will serve us well in future. There are, however, reasons to be positive.
Our financial services industry today employs more than 13,000 people, the highest figure in nine years, and representing more than a quarter of total Island employment.
The value of collective investment funds administered from Jersey has exceeded its previous 2007 peak, and now stands at £290 billion, while the total funds under investment management are at £23.8 billion. And we remain at the forefront of global standards, in terms of transparency and information exchange – where our regulatory regime is assessed as being among the best in the world. It’s clear that the industry is in a good position, but we must continue to innovate in order to achieve the competitive advantage that will maintain that position.
In the last week, the States Assembly passed legislation introducing Limited Liability Companies (LLCS), providing a vehicle that will be familiar and attractive to US investors. But there are risks that we must manage too.
New products and increased interest from global investors require continued vigilance by our regulator. The European Code of Conduct Group on Business Taxation have made clear their concerns about Jersey entities demonstrating economic substance. I have confidence, following in-depth engagement over the last year, that we will meet those concerns.
We also can’t ignore the Island’s disappointing productivity performance. In the last year, we’ve seen significant falls in the finance sector – largely driven by the low-interest rate environment. But there’s also been no measurable growth in non-finance productivity.
If this poor performance persists, it will act as a drag on the medium-term prospects for our economy. Low-paid jobs, combined with significant inward migration of low skilled labour, has compounded this problem.
Only by widening the diversity of our economy can we demand and attract new skills and high-value jobs to the island. We run the risk of stagnation if we don’t work together to address productivity head-on. That is why I am sure you will not be surprised to learn that productivity forms part of the Common Strategic Policy we will be lodging in October.
Now, we must look to the elephant in the room. As we move towards March 2019, the prospect of a no-deal Brexit still remains a distinct possibility. Within government we are preparing the contingency plans for facing that eventuality, and I would encourage all industry leaders to do the same.
In our planning for our future relationships with the UK and EU, we’re also carefully considering what trading arrangements will be needed to improve our GVA and productivity in the longer term.
There are two focal points of particular interest for local businesses.
The first is the positive ongoing work with the UK government to define a new customs relationship post-Brexit, allowing us to build productively on the Charters that have defined that centuries-old association.
The second is the extension of the UK’s membership of the WTO to the Island, which has been a longstanding objective of the government.
A comprehensive audit exercise has taken place across government departments, and officials are assessing the 23 agreements underpinning the WTO, and identifying potential areas that need to be addressed in order to secure this extension.
Automation and the emergence of Artificial Intelligence also present a combined threat and an opportunity for Island businesses.
PWC, in an analysis of the risk of digital disruption and automation in 2017, found that 30% of UK jobs could be at high risk of automation by 2030.
While roles dealing with complex interpersonal relationships and communication are least likely to be affected, there’s a risk that certain routine administrative jobs will become obsolete.
The highest risk of those being technologically unemployed are those with lower educational achievement. This means that we must provide the educational and skills development to retrain and redeploy people working in lower-paid, lower-skilled roles, and we must prepare them for the new roles that will emerge as a result of the fourth industrial revolution.
I’m proud that our government has already recognised and begun to address some of these challenges, including seeking Future Tech Talent placements for our Trident work experience scheme, and introducing the Back to Work digital staff scheme. This provides paid training opportunities for digital businesses, with 12 weeks of subsidised costs for employers taking on staff in this developing sector.
And, in recognising the critical importance of the sector, the responsibility for digital will shortly return to the portfolio of the Economic Development Minister, providing increased government focus with the intention of additional industry involvement.
Supporting the economy
The challenges we face are pretty stark. But I don’t want the overriding message of this speech to be one of negativity, because I sincerely believe that our economy will endure these challenges – as it has done before – and seize the opportunities. But we must do this together, and the government certainly isn’t shirking our responsibility.
We want to help improve the productivity of existing businesses. We’re committed to supporting local companies with the potential for high growth and to supporting the creation of new, high-value businesses.
We’ve already invested more than £400,000 through Digital Jersey to establish an Internet of Things Lab at Red Houses. Through Skills Jersey we’re offering primary and secondary students, for the first time, the opportunity to develop practical engineering skills in school.
And, critically, we’re providing the right environment for emerging businesses.
The roll-out of gigabit fibre to all Island premises, and the introduction of our high speed mobile network, has significantly increased the possibilities for Jersey to be used by global businesses as a digital sandbox. With the right infrastructure in place, with increased connectivity, and with the financial incentives that make Jersey an attractive place to live and work, our Island will thrive.
I also accept that we also can’t preach what we don’t practice. So, led by our new CEO, we’re making fundamental and necessary changes to how we manage government finances and run our public services.
I’m sure Charlie will address these changes in more detail during the panel session, but I wanted to make clear my commitment to these very necessary measures to achieve greater accountability and productivity in the public sector.
We’re also building the capability to promote our Island’s products and services as we forge a stronger international identity for Jersey. For the first time, we have a Global Markets team in place in the Ministry for External Relations, dedicated to developing relationships in Africa, India, the Middle East and China. That team is already bringing together a broad range of government departments and partner organisations – to pursue our long-term objective of becoming a ‘partner of choice’ in priority markets.
As an outward-looking and export-oriented economy, I believe that Jersey has every potential to conduct more trade with non-EU markets, in line with broader changes in the global economy.
This will take time and significant effort – and it will work more effectively in partnership with you.
Government alone cannot provide the catalyst for economic growth. Our island businesses are our Island economy – and I can’t overstate the importance of the contribution from the people in this room. There must be a commitment within your organisations to meet the challenges I have described.
When you leave today, please ask yourself important questions about your business preparation and resilience.
Where automation presents a risk, are you providing the opportunities for your staff to retrain?
Are you preparing them to take the lead in the new roles that will be created?
Are you undertaking the planning necessary to recognise and meet the needs of emerging business sectors?
Today, we can take an active step in meeting the risks to our continued prosperity – especially in terms of productivity. I’m asking you to pledge to invest in local talent.
While many businesses already have excellent student schemes in place, I believe more can be done.
We, as a government, will be making an active commitment to attract more Island graduates to a career in public service. And, today, I’m asking each and every island business to commit to implementing paid internships or work experience. Providing practical experience and skills to young islanders is an invaluable investment in our future workforce. We need to show our students and graduates that Jersey is an attractive and viable place to live and to work – and not just in financial services, but across all industry sectors.
A long-term vision
It is no longer just the fittest – but the smartest, most resilient and most adaptable that survive in the turbulent global economy. Jersey Business plays a vital role in building this resilience, by providing independent support across all business sectors to promote greater productivity and in turn sustainable economic growth.
We’re in the early days of a new government – just over 100 days – but I’m committed to working in partnership with Jersey Business, with industry and with the leaders here today.
I want my government to support all sectors of the Island economy, from small businesses to global financial services, and ask for the same commitment from you in return.
Before concluding, I wanted to reflect that one thing we do not do well is tell the world about ourselves. It’s about getting the Jersey message out there.
Over the course of my political career, I have regularly met politicians or business leaders who have said 'tell us your story' or 'I did not realise that about Jersey'. Even in my new role that continues to happen. We are going to change that.
As an Island we sometimes have the tendency to be inward looking and overly self-critical, mainly because we all have high expectations.
We must never forget that we often punch above our weight, whether it is with fibre connectivity, our regulatory standards, or the ease with which we can bring government, officers and business together to resolve an issue. Combine that with our culture, our heritage, and our ability (at a business level) to move swiftly when we need to, then we do have a USP.
We can build and grow a prosperous, sustainable, internationally-competitive economy – one that meets all the challenges that we face. And we can only do that successfully if we do it together.