Action needed to "rejuvenate" economy

Tuesday 13 October 2020

The Founder and former CEO of the Bachmann Group says that "procrastination is not an option" for the States as it aims to rebuild and grow the economy post-pandemic.

Peter Bachmann has conducted a comprehensive analysis of the potential impact of the global corona virus pandemic and Brexit on Guernsey's economy.

He has comes to the conclusion that unless we go down the route of austerity or a substantial increase in taxation - both of which would be highly undesirable and unacceptable to the community - the focus has to be on "at least maintaining, but doing all we can to grow the island economy and thereby the tax take."

One way to do that, he professes, would be to increase the number of people working in the finance industry through an "urgent rethink" of residency laws.

"At one point last year I believe there were over 1,200 individual jobs being advertised by employment agencies in the finance industry," he said. 

"However our complex employment and residential legislation militates against advertising off island. This whole area needs an urgent rethink, particularly the residential licensing system."

Pictured: Mr Bachmann said the island's complex employment and residency laws are a barrier to targeted population growth. 

The other suggestion he makes is to rejuvenate tourism, which was struggling long before the pandemic entered the conversation.  

"The tourist industry is the third largest employer in the island. Whilst not paying the level of salaries of the finance industry, it does encompass a large number of small to medium size enterprises which comprise much of the backbone to the diversity of our community, which is a substantial benefit to the island economy.

"We appear to have a chicken and egg problem in the minds of many in the community. I hear from some people the argument that more tourists will not come to the island until there are better facilities such as special attractions. 

"However the majority of the tourist industry says loud and clear it will not invest further until there is a reasonable chance they will receive a worthwhile return on their capital outlay. This is fundamentally dependent on the number of tourists coming to the island."

The independent Frontier Economics report evaluating the cost-benefit ratio of extending the runway offers a way forward, according to Mr Bachmann, who feels the States has "buried" an insightul and comprehensive review that it paid hundreds of thousands of pounds for. 

Pictured: The late Deputy Jan Kuttelwascher, centre, brought the requete that led to the production of the Frontier Economics report.

He draws five conclusions from the report:

1.     Over the forty year life against which major infrastructure investment is measured, the extension of the runway was easily affordable and was likely to provide a major boost to the numbers passing through the airport.

2.     Just less than 9,000 passengers a year more than otherwise would have been forecast would be sufficient to repay the debt and service the interest cost over the forty year period. To put this number in context the Airport business plan, in 2018, was intending to try and increase airport numbers annually to 850,000.

3.     Airport numbers have fallen by nearly 2% on average every year for a decade.

4.     On average, Jersey fares to the UK are 39% less than those to the UK from Guernsey.

5.     To put it another way if you take the Jersey fare to the UK as the industry norm; every person flying in or out of Guernsey has to pay an approximately 60% surcharge for the privilege.   

"Not only is this fare structure differential unacceptable it is unsustainable," he commented. "It is not only a massive hidden tax on every Guernsey person flying to and from the UK but a huge disincentive to every potential visitor thinking of flying to the Island on holiday.

"Given that the Guernsey/Jersey holiday offering is broadly similar, how are we to compete?

"The only possible conclusion is that we must extend the runway to allow other airlines as well as Aurigny to fly in and out of Guernsey, as in Jersey, so that airfares can be reduced to an industry norm. To do nothing is just not an option."

Mr Bachmann's letter can be read in full here.