Nick Moakes: What has the finance sector ever done for us?

Let me start by asking a question. What has the finance sector ever done for us?

To most people, especially those who work in the industry, the answer is pretty clear. But to others it can be less so. Before going into politics, I worked in financial services for 25 years, and as finance sector lead on the Committee for Economic Development, I still play an active role in the industry.

I passionately believe in the value that the finance sector brings to our island. Here I want to explain why I think that this industry is vitally important to our island’s economy and how it benefits everyone living here.

So, what is the Guernsey finance sector? While we generally refer to the finance sector, it is actually made up of a number of sub-sectors, sometimes referred to as ‘pillars’. These are insurance, funds, fiduciary and banking.

Each of these pillars provide unique service offerings and are all areas in which Guernsey is internationally competitive. Looking at each of them in turn.

• Insurance

Most people are familiar with the general concept of insurance and there are locally-based firms which provide access to everyday insurance products which we all use. However, the sector is far more diverse than this. For example, we are the leading domicile in Europe for captive insurance – a way in which large companies can insure themselves – and the cell company, widely used in the insurance industry, actually originated from Guernsey, and is now widely copied throughout the world. A proud local innovation.

• Funds

Investment funds are vehicles where investors pool their resources. These funds are then invested to generate returns. They are utilised by a wide spectrum of parties, from individuals to pension funds. In fact, the States of Guernsey has operated an investment fund - the Guernsey Investment Fund - since 2017. There are also several categories of funds operating in Guernsey, including ‘green’ funds, which make investments that have a positive environmental impact.

• Fiduciary

Fiduciary (wealth) is one of the longest-established of the four pillars in Guernsey. Services are provided, principally, to international private clients but also to the corporate sector. These wealth management services are well established and have evolved based on strong, highly personal relationships, which are often long-term and sometimes span generations. Guernsey’s success in this area is due to the fact that it is well regulated and provides a safe and secure environment for private wealth.

• Banking

There are 20 licensed banks in Guernsey, including retail banks, which serve the public, and private banks, which work with high net worth clients and expatriates. A range of services are provided by these banks, ranging from deposit taking, loans and mortgages, to foreign exchange and international payments.

Clearly, this is a high level, and very simplistic, overview of our finance industry. And there are, of course, other businesses offering other finance-related services. In addition, we cannot talk about the finance sector without highlighting the importance of the professional services sector of legal and accounting services, as well as all the other businesses that contribute to its success. In fact, it is by working together that these industry sectors have been able to develop, and implement, a range of innovative solutions which have turned Guernsey into the leading international financial services centre that it is today.

And Guernsey really does punch above its weight on the international stage. Recently we have been recognised with International Investment’s International Finance Centre of the Year award, a Citywealth gold award for International Finance Centre of the Year; and Guernsey remains Europe’s largest captive insurance domicile.

• The value of the finance sector to Guernsey

Guernsey’s finance sector delivers a wide range of benefits for the island.

In terms of economic output, it contributed an estimated £1.3bn* to Guernsey’s economy in 2022. That is circa 38% of the island’s entire GVA. If you include legal and accounting activities, GVA increases to an estimated £1.5bn* – roughly 45% of the island’s entire GVA or economic output.

In terms of people, the finance sector employed 5,822** in September 2023. That is more than 17%** of Guernsey’s workforce and makes it the island’s largest employer. Again, if you add in legal and accounting activities (1,861 people**), the number increases to somewhere in the region of 23% of our total employed population. I would be surprised if there are more than a handful of people in Guernsey who do not know at least one person who is either directly or indirectly employed in one of these sectors.

And because of its scale, the finance sector has a huge impact on the rest of the island’s economy. Even if you do not work within the sector, it is almost certain that you benefit from it in one way or another. Collectively, the finance sector is the single biggest contributor to the island’s overall tax take. This money goes on to help fund the island’s infrastructure and essential services such as schools, hospital facilities and social welfare that benefit everyone on the island.

If you own a business, the chances are that some of your customers will work in finance and professional services. And because roles in these sectors are generally well remunerated, people working in them will often have a healthy disposable income, making them valuable customers across a whole range of local business sectors, including retail, hospitality and construction. And it is not just people working locally who contribute towards our economy. Many people travel to Guernsey on business and also spend in our hotels, shops and restaurants.

And let’s not forget the support that the finance sector provides to a wide range of on-island initiatives which benefit the wider community. Supporting charities, funding cultural events and sponsoring sports-related activities to name a few. It is probably true to say that some of these initiatives would not survive without the financial services industry.

Let’s be clear, every business and every job are important, so you may be wondering why I am focusing on the finance industry.

The reason goes back to the question I asked at the very beginning – what has the finance sector ever done for us?

It is a question that people have asked, and I hope that this article helps answer that question.

For me, the answer is that the finance sector is responsible for a huge proportion of our island’s economic output; it employs more people than any other sector; it contributes a significant amount of tax to pay for essential services; it generates significant spending power that goes back into the local economy, and it supports a wide range of good causes.

So, it does rather a lot for us really. I believe that we should be proud of our financial services sector and recognise that it makes Guernsey a better place, both economically and socially. Where would we be without it?

Sources: States of Guernsey

* Guernsey Annual GVA and GDP Bulletin 2022 (First Estimates)

** Guernsey Annual Electronic Census Report