IoD leaders call for urgent action to rescue the economy

Friday 28 June 2024

Guernsey's business leaders have shared their negative feelings around the island’s overall economic outlook in a revealing survey - repeatedly raising the same concerns around connectivity, housing, and slow decision making by the States.

The Economic Development President has responded - saying he's "encouraged" by the survey results, while also being "confident" in the island's future.

The survey in question was carried out by the Institute of Directors.

Its results showed a "-18% net positive sentiment about Guernsey’s economy over the next 12 months", with the highest proportion saying they feel "quite pessimistic".

Less than a quarter of industries represented said they felt optimistic about the local economy though.

This compares negatively with similar surveys carried out in the UK, the IoD has warned. It says the most recent UK IoD survey revealed a -3% net positive reading about the UK’s economy.

However, Guernsey business leaders say they feel confident about their own organisation’s prospects, with a +47% net positive response to the question, and the majority saying they feel "quite optimistic". This compares with +41% In the UK. 

Pictured: The first IoD Directors' Economic Confidence Survey received feedback from over 20% of the IoD's membership. 

Leader’s positivity in their own organisation’s prospects is backed up with a +30% response about increasing revenue over the next 12 months, with the majority of business leaders also saying they will be increasing headcount and continuing to invest in their business.   

Whilst revenues are set to rise, +75% say they expect their costs to be ‘much higher’ or ‘higher’, and +21% expect their investment in the company will also increase. Unsurprisingly, profit increases will be stagnant, with a net positive percentage reading of only +1%. 

When asked about the negative impacts on their businesses, respondents rated air and sea links, cost and availability of labour and skills shortages/skills gaps as the top three concerns. 

Shortage of housing for employees and compliance with government regulation were cited as the fourth and fifth most significant challenge. Wider economic conditions, local economic conditions and political uncertainty also made the top 10 concerns. 

Richard Hemans, the IoD Guernsey's economic lead said all of the themes covered in the survey were reflected in the genera comments respondents made too, which included statements focused on housing, the slow pace of government decision making, connectivity issues, and regulation in financial services.

Pictured: Richard Hemans, the IoD Guernsey's economic lead.

"This is a key piece of economic data which will help us to understand the state of the local economy and the important business issues, overall and by sector, and to inform the States of Guernsey’s thinking," he said.

"We can look at current issues and trends going forwards, tracking business sentiment towards challenges like housing and connectivity, which organisations rely on to conduct business and to attract and retain staff.

"There are lots of positives, with respondents feeling optimistic about the prospects of their own businesses and looking to employ and invest over the next 12 months. Whilst the overall view of the Guernsey economy is negative, the other responses indicate some confidence and positive if muted economic growth over the next 12 months.

"It is encouraging that businesses are still looking to employ people and invest in their productive capacity because it suggests confidence in their prospects. The negative impacts reported are not new news but clearly need to be addressed with urgency."

In response, the President of the Committee for Economic Development, Deputy Neil Inder said that he welcomes the views of IoD members through the survey and he recognises the concerns they raise.

"Many of the key concerns they highlight such as travel links, attracting skilled staff and housing are priorities for the States and issues we are actively addressing," he said.

Pictured: Deputy Neil Inder (inset) is the President of the Committee for the Environment and Infrastructure. 

"I am however encouraged that the vast majority of respondents are optimistic about their own organisation over the next 12 months, and have positive expectations in terms of levels of investment, revenue and job growth and I think that in itself speaks to reasons for being more confident about the Island’s economy as a whole – an economy that grew above expectations, by 7% in real terms in 2021 and 4% in 2022 (the most recent years for which data is available). The confidence and optimism levels are also demonstrative that Guernsey continues to be an attractive and competitive jurisdiction to do business.

"None of that however is reason to be complacent, and we take very seriously the need to address some of the key issues raised in the survey, and maintain and grow confidence in the Guernsey economy," he said.

Deputy Inder has sought to allay some of the fears that IoD members have raised through the survey - but his message is vague at times, alluding to ongoing negotiations which are subject to confidentiality clauses at the moment.

"We are currently working through a formal tendering process for our sea links, with Jersey, to secure the best possible passenger and freight service. I can’t comment on that in any more detail as it’s an ongoing process, but we expect it to conclude before the end of the year and look forward to being able to make that announcement.

"With regard to air links, we know there have been real challenges for Aurigny and we share the frustrations of businesses, and everyone else who has been travelling to and from the island. But having been faced with a ‘perfect storm’ of issues, Aurigny have been very open about the steps they are taking to address them, streamlining their fleet to be more efficient and reliable, and consolidating their new routes while maintaining key new destinations such as Paris.

Pictured: Some of the issues raised through the survey are already being addressed said Deputy Inder.

"In terms of being able to attract workers with the key skills, whether they are young islanders already here or coming from elsewhere, housing is a key challenge. As a Guernseyman and a father of two I have real concerns that where Guernsey used to be an exporter of tomatoes and flowers we are now heading towards the export of our young talent. That’s a carve-out of culture and heart of the people of this Island, those of us who grew this Island through our labour and diligence to create the vibrant economy that we have today. We owe it to our sons and daughters to deliver on a build programme of the existing sites and at least give them something that looks like hope and a future in their Island. Anything less is failure."

Despite being politically responsible for the island's economy, Deputy Inder's response to the survey indicates that other States committees are holding the cards when it comes to restoring confidence going forward.

"The Policy and Resources Committee is continuing to explore a significant investment into developing Leale’s Yard which would also make a big difference in providing additional housing. And initial drafts of the Guernsey Development Agency’s presentations have further focus on the Bridge and, if the stars line up, there is a real opportunity to provide the desperately needed housing for many of our Islanders and businesses," he said.

"We need to deliver on all those fronts. The people of Guernsey don’t want to hear about another policy and another review, neither I do. The failure in housing is simply that there aren’t enough of them; the Policy and Resources Committee has put housing as central to their success as we head towards an election; I’m confident they will deliver on his key policy.

"But we also need to invest more in our Island, not just in housing, but in our infrastructure and public spaces. We can expect to see more on that from various States Committees this year. By making that investment, we cannot only improve the services available to Islanders but also help to grow confidence in our Island’s economy. Guernsey’s a great place to live and do business, but it needs to be for everyone. I remain confident in the future of the Island as does the IoD, and I welcome the input from their Pulse Survey."

Pictured: Housing, transport links, slow decision making by government, and banking difficulties were all cited as concerns by respondents to the IoD survey.

The island's first Directors' Economic Confidence Survey received feedback from over 20% of the IoD's membership with financial services dominating the sectors responding but the IoD says there was good representation across all sectors, "meaning that respondents approximately mirrored the island’s industrial make up".

Mr Hemans said: "We would like to thank everyone who took part in the survey. We are confident this is representative of our membership view and this first edition gives us a good baseline for our future, bi-annual surveys.  

"The IoD will be considering the data carefully to help us shape our future activities. We are sharing the information with Deputies and senior civil servants and we look forward to working with policy makers and other business organisations over the coming months to understand and help to improve business confidence." 

The full survey results can be found on the IoD’s website, and includes survey data by sector and industry response figures. The next Directors' Economic Confidence Survey will run in November 2024.