Credibility crunch

AS LANDSBANKI Guernsey customers count the cost of the bank's collapse, the wider impact on the island is starting to unravel.

The personal loss will naturally make the headlines, but some commentators fear that the whole situation leaves Guernsey's reputation damaged – just how badly and what that means in reality remains to be seen.

And before those promoting the island's interests start shouting, it is the perception that is key.

Those with experience of dealing with Guernsey, particularly in the finance industry and at senior levels in government, know that it is a well regulated and competitive jurisdiction, indeed the island's PR men GuernseyFinance consistently use trade publications to say so, but that means little to those outside our shores, who, when you mention Guernsey, immediately think 'tax haven.'

It did not take long for the likes of Liberal Democrat Vince Cable to use the whole situation as a springboard for an attack on the Crown Dependencies.

Now he may be a lone voice shouting in Westminster, but it is a dripping tap and the longer it drips the more people will get wet.

And you should not just dismiss Mr Cable as you would some ill-informed junior MPs – he has won respect in the Commons with his performances, filling in during Prime Minister's question time and foresaw the financial crisis. He is well thought of.

The Landsbanki Guernsey story has snowballed in the national press since it went into administration – especially once those who stood to lose out started lobbying the media about their plight.

That just adds fuel to the misconceptions.

You will find little sympathy from those working in the UK media for the Channel Islands.

Opinion formers are of the age that means they associate the island with tax dodging and wealth, however wrong that is.

This in itself reflects on the populace – those who do not have connections to the island will only have a picture formed by what they read or watch.

'It's very difficult to drum up sympathy for the islands on financial matters when the going gets rough, because the perception is Guernsey can do very well on its own,' said former BBC regional political editor Bruce Parker, a Guernseyman who lives in Hampshire.

It would be wrong to put too much emphasis on how much people in the UK really care about the Crown Dependencies, to many it would just not come across their radar.

And certainly in the upper level of government much is done successfully to keep a strong working relationship.

There has been some solace in the recognition in the UK Treasury of the benefit of Guernsey-based subsidiary banks to the UK through upstreaming and the wider good this has for the Government there.

And also in the offer to represent Guernsey's interests in talks with the Icelandic Government – but then again international dealings on that level are one of the mainstays of the constitutional relationship with the UK, so all being well you would expect that to happen.

Labour telling UK depositors with money in Landsbanki Guernsey that it was for this jurisdiction to deal with may have caused consternation for those potentially out of pocket, but if it had intervened directly and publicly it would have undermined Guernsey's constitutional position.

In many ways it is better for the island to stay off the political radar because if the relationship broke down the consequences could be dire.

Things appear to have subdued over issues such as low value consignment relief – the VAT ruling that benefits exporters from here but causes such irritation to businesses in the UK – but in a recession it is these kind of things that those struggling will start lobbying hard about again.

The island has friends in the right places to ward off unwarranted attacks, but it has a PR headache now and as the popular saying goes, 'perception is reality.'