Guernsey's economy threatened by "over-reliance" on finance

Tuesday 29 September 2020

The UK Government could look to create an offshore-style finance centre out of London in order to start addressing record-breaking national debt - and a well-travelled CEO has warned that Guernsey must start diversifying its economy now to combat the "evident" threat that would pose to our financial sector.

Trust Corporation International Chief Executive Officer Mort Mirghavameddin predicts the UK, which is facing a record £2.024 trillion national debt, will have to drastically alter its tax structure once the threat of Covid-19 eventually subsides.

Mr Mirghavameddin, who started his career at the London Stock Exchange in the 1980's, told Express last year that one of the biggest threats to Guernsey post-Brexit would be if the UK Government looked to establish London as an off-shore style finance centre. 

Pictured: The finance sector has contributed positively to GDP growth for each of the last four reported years.

The need for the UK to review its tax structure after its withdrawal from the European Union has been heightened by the pandemic's devastating financial impact. 

"Once the issue of Covid dissipates and the UK Government considers its position outside of Europe, and the gargantuan fiscal deficit, it will have to consider all of its options," said Mr Mirghavameddin. 

"Do they raise taxes - a very unconservative action - or do they create a fiscal and tax environment that attracts business? If the latter, the likelihood of a threat to the Channel Islands is evident."

One of the factors that sharpens the potential impact of such a move is Guernsey's undeniable dependence on financial services, which represents around 20% of employment in Guernsey and 40% of GVA.

"The fact that we still remain overly reliant on the finance sector causes me some concern. Some potential deputies have been listening to voters and canvassing opinions on alternatives such as the healthcare sector. We should seriously consider other avenues like health, the arts and other such alternatives."

Pictured: Art For Guernsey is currently hosting an exhibition celebrating Renoir's links to Guernsey - Mr Mirghavameddin is a supporter of local initiatives promoting the arts. 

He is in no doubt that the presence of Covid-19 has changed the nature of the Brexit debate, coverage of which has been largely sidelined by the global spread of the virus. 

"Certainly it appears that the shock of Covid-19 has ended the overt ‘culture wars’ politics predicated on the partisan leave/remain divide in existence prior to the pandemic," he said.

"The urgency of the need to find a solution to this immediate problem, along with the potentially catastrophic impact on the economy, has focused minds on one particular massive issue. To tackle both effectively and simultaneously would have been a herculean effort beyond the realms of the capability of most governments."

The capability of our government, he says, has been enhanced through the pandemic, improving the perception of Guernsey through national and international media exposure.

Pictured: Mr Mirghavameddin said the CCA and Director of Public Health had adopted "a very conservative" but also very effective approach which has kept the island Covid-free. 

However, he believes the current restrictions cannot be sustained indefinitely and is awaiting the trigger point that will allow the Bailiwick to progress hrough its exit-from-lockdown strategy.

"The approach adopted has been fantastic and credit to Dr Brink, Deputy St Pier, Deputy Soulsby and the Civil Contingencies Authority," he said.

"I think at some point soon the very conservative approach which has resulted in excellent “zero Covid” results will need to relax. This will be predicated upon better testing methodology or indeed a vaccine.

"Remarkably, the staycation environment has maintained our local tourism industry, but this cannot continue indefinitely. The lack of travel and face-to-face meetings will of course have an impact on business development across all sectors."

Pictured top: Mort Mirghavameddin.