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Optimism that spring heralds first shoots of economic recovery

Optimism that spring heralds first shoots of economic recovery

Thursday 25 February 2021

Optimism that spring heralds first shoots of economic recovery


The financial effects of Guernsey's first lockdown may be less severe than originally feared, raising hopes that the island can recover well again this time.

In Wednesday’s States meeting, Deputy Mark Helyar, Treasury Lead for the Policy & Resources Committee, indicated that Guernsey’s economy has coped with the effects of the Covid-19 enforced lockdown better than expected and may even be showing the first signs of recovery.

At the end of Q1 of 2020, financial forecasts estimated that the shortfall in revenue income in that year could be over £70 million. After restrictions were lifted and the on-island economy returned to near-normal, this forecast improved significantly - Deputy Helyar’s 2021 budget report estimated a shortfall of around £30 million. 

That figure has now been further revised downwards. 

“Year-end tax receipts and other revenue streams have been stronger than anticipated, and this shortfall has provisionally reduced to between £5 million and £10 million,” said Deputy Helyar. 

He stressed that the figures were provisional but added that financial indicators are “hugely encouraging and a strong platform from which to enter 2021”. 

“Suffice to say for now that our Customs and Document Duty receipts have been exceptional, and that income tax receipts have held up much more strongly than anticipated, which means that we have entered the second lockdown period in a position of greater economic strength.” 

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Pictured: Deputy Mark Helyar, Treasury Lead for the Policy & Resources Committee, said financial indicators were "hugely encouraging".

Committees underspent their collective authorised budgets by over £8 million, Deputy Helyar said. There was significant additional expenditure in certain areas in response to the pandemic, most notably health and social care services – an additional cost of almost £3 million – and income support payments – £4 million over budget. However, these were "more than offset" by reduced expenditure elsewhere.

Supporting businesses through 2020 cost about £51 million of taxpayers’ money, grants to small businesses and payroll co-funding supported over 2,700 entities, and unemployment remained relatively low, he added. 

“This much-reduced deficit is undoubtedly largely as the result of the majority of the economy being able to return to near-normal conditions so much earlier than had been expected last year. This underlines the importance of economic activity being able to revive and support our community and our public finances,” said Deputy Helyar. 

There are fewer small businesses making a claim than during the equivalent period last year.  

Deputy Helyar said: “This is encouraging as it indicates business confidence in being able to swiftly resume trading without needing to rely on business support following the experience of 2020.” 

“In summary, we don’t know what lies around the corner, but this is very positive news for the Bailiwick and is testament to the patience and the resilience of the public and businesses across all sectors. With spring almost upon us and the weather finally showing signs of improvement, we do hope that the economy will recover strongly as we pass out of the current lockdown.” 

PICTURED TOP: Guernsey's economy is showing potential of growth post-lockdown.

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