FORGET whether it’s £500m. or half a billion, or from the rainy day fund. Or borrowed via a ‘war bond’ from Guernsey’s rich and famous. Cadged, even, from the Bank of England. It’s irrelevant. Because it’s not even a question of whether it’s a lot of money. The only issue is whether it’s going to be enough.
You see, what’s making me really, really angry is that the other victims of this disease – those whose jobs, livelihoods and businesses have been pitched into intensive care by government decree – are not being heard.
A flavour of this emerged on the radio last weekend when the boss of a local hotel chain revealed how close to the wire they are. Like three winter seasons back to back, she said.
Even then, many of our elected representatives still don’t get it. To spell it out, the Peninsula, Fleur du Jardin and Les Douvres hotels employ about 70 staff, most from off-island. They have to be accommodated, fed and paid.
Forget also the ‘furlough’ arrangements. Even 20% of the minimum wage represents around £50,000 over three months. Yet those hotels have no money coming in and still have other bills and expenses to meet.
Unhappily, the interviewer didn’t ask when the group’s money would run out. If it does, that’s a double hit for the island: loss of tax and duty from a previously thriving hospitality group plus the unemployment and repatriation costs of the laid-off staff to pick up.
Unless you’ve run or been involved in running a business, it’s hard to emphasise the importance of cashflow. It’s why an organisation the size of British Airways is laying off 12,000 people and we’re chucking near £30m. (more than £700 per taxpayer) at Aurigny to keep that afloat. For heaven’s sake, the States of Guernsey itself is running short. That’s why the first £250m. of borrowings are needed.
Elsewhere, things are equally grim. The Chamber of Commerce, where the majority of its members are small organisations with fewer than 10 employees, tells me that for most of them business has dropped off a cliff and the situation is ‘pretty dire’. The next two months will be critical for many and while hospitality is probably the worst affected, retail is also facing disaster.
This is why I anticipate government will have to step up the support package and offer 100% of minimum wage in certain areas because businesses on tight margins and no income are on life support and may not pull through.
Doing a bit more digging, a reasonable estimate is that a quarter of Guernsey economic activity has stopped. Lyndon Trott, leading the States’ economic response to the pandemic, has quoted forecasts that we could have 2,000 unemployed, although some other estimates are as high as 3,000.
To put that into context, the crippling recession of the early 1980s saw ‘only’ around 1,800 jobless. Yet around a third of the island’s 31,500-strong workforce are affected by the Covid-19 restrictions and more than 6,000 of them are directly involved in retail or hospitality – the most exposed sectors.
And before you say I’m overplaying this, please also bear in mind that incoming Chamber president Elaine Gray, a partner at Carey Olsen, has warned that not even finance (19% of the workforce with 6,297 employees) is immune because it is hit by falling markets and head office reviews.
The clincher in this bleak scenario is that the pandemic is over only when effective treatments or vaccines emerge. Work through that, plus the latest local infection figures, and you reach a couple of conclusions.
Guernsey will shortly become, to all intents, virus-free. To stay that way, however, the island’s borders have to remain closed. But that further prevents business travel and tourism as we know it.
To date, I think I’m right in saying, Covid deaths have been confined to the over-85s. Each one of the 13 to date is a tragedy yet there are around 1,600 of such senior citizens in the island, so you can see how much worse things could get.
Therefore the dilemma for policy makers is whether to ease travel restrictions and help hospitality, retail and the rest of the island recover, potentially putting the elderly and vulnerable groups at risk again, or forcing the permanent closure of hotels, restaurants and other linked businesses.
Worse case calculations suggest that the value of Guernsey’s economy will fall by 75% from its current £3.3bn to £2.4bn. Since this measure, GDP, represents the value of all goods and services here, you can see how calamitous this – self-inflicted but necessary – collapse has been.
Clawing back from the brink, ensuring we have working ferry, freight, airline and other essential services, plus trying to encourage people here to spend money in mothballed hotels will be a huge and costly undertaking. But it’s essential if we are to Get Guernsey Working again.
Government will also need to spend on infrastructure projects that keep cash circulating locally. Perhaps even wastefully: no cheapest tender if that means off-island contractors or labour. Perhaps subsidising ferry and airfares to get visitors into the shops, restaurants and hotels we have so nearly destroyed.
So stop fretting about £500m. being a lot of money. The only question is whether it’s going to be enough to hand Guernsey back to our children, grandchildren and great-grandchildren as good – or hopefully better – than it was before the epidemic.