Government infrastructure spending will 'boost' Guernsey economy

Kevin Boscher, chief investment officer at Ravenscroft Group, said productivity had stalled in developed economies amid changing demographics – such as Guernsey and Jersey – and that targeted spending could help drive it up.

‘Monetary policy is controlled by the Bank of England, luckily it’s on our side,’ he said in a podcast with the Guernsey Press’s business editor. ‘We can’t control the exchange rate. But luckily Sterling is cheap, which gives our exports a bit of a boost.

‘But what we can control is fiscal spending. So, I think it’s imperative that we like every other government in Europe, the US and pretty much the world over the next three, four, five years invest in the economy.

‘It’s not just about controlling spending. It’s about investing in the economy alongside business in order to do things and take measures which are going to enhance long-term growth through increased productivity.’

That meant infrastructure spending, improving transport and communication links – in particular broadband connectivity.

‘We have all seen through lockdown and since then we are all learning to live, work, communicate and spend leisure time differently through the use of technology,’ said Mr Boscher. ‘One of the key things that consistently comes back from business particularly in Guernsey, not so much in Jersey, is we could do with faster broadband and better connectivity.’

Anything the government could do in this respect would be ‘helpful’. It also needed to step in and ‘plug the gap’ when consumers stepped back because of increased savings or having less money to spend.

‘A lot of that spending should be targeted at these issues which are going to boost that long-term productivity and growth,’ added the investment expert.

In the podcast, which considers the outlook for 2021, Mr Boscher also said that the Channel Islands avoided the ‘extremes’ of other economies.

The key financial services sector had largely come through the Covid-19 pandemic reasonably well from a profitability point of view and employing people. ‘So, I think we are in a better place than many. But nonetheless it has hit us hard,’ he said, referring to the pandemic.

Guernsey and Jersey could benefit, however, if the global economy was much stronger next year as a result of governments around the world - including in the US - increasing spending, central banks keeping interest lows and Covid-19 vaccines enabling activity to get back to normal quicker.

‘We are an export industry. We export financial services and other services globally. If the rest of the world is getting stronger, consumers have got more money to spend and people are getting wealthier then they need to invest that wealth. And obviously we can benefit from that,’ concluded Mr Boscher.

Listen to the podcast by clicking here: Channel Islands Business Podcast