Financial Crisis Hits Jersey Finance Industry Profits
Thursday, May 10, 2012
The Jersey government's latest statistical report shows a significant decline
in the profitability and size of the nation's financial services industry since
the start of the financial crisis, putting pressure on Jersey tax receipts. Recent
figures for 2011, however, show modest signs of improvements.
The Gross Value Added (GVA) of the financial services sector declined nominally
in 2011, accounting for 40.5% of the Jersey economy, against 41% in 2010.
Banking deposits have declined from a peak of GBP219.5bn (USD353bn) in 2007,
to GBP167.3bn in 2011, slightly higher than the GBP167.2bn recorded in 2010.
The total value of collective funds administered from Jersey grew between 2001
and 2008, reaching GBP239.9bn, but declined by almost a third in the year 2009
alone, to GBP163bn. This figure has since increased to GBP193.7bn in 2011. The
number of funds administered from Jersey has more than quadrupled over the last
The number of investment business clients declined by more than 1,000 between
September 2008 and September 2009. September 2011 reported an increase in the
number of clients of 200 (1%) compared with 2010. This increase was reflected
in the value of funds managed (up 1% on 2010). Meanwhile, the average asset
value per client has remained at a similar level to 2010.
Despite the challenging environment for many sectors, the report says Jersey
is becoming a key low-tax jurisdiction for corporate registrations, with 33,194 live
companies on the register as of September 30, 2011.
Despite slow improvements in the financial services sector as the global economy
recovers, the total net profit (on which Jersey tax is levied) of Jersey's financial
services sector in 2010 was estimated to be GBP605m. This total represents a
fall of a quarter (25%) compared with 2009, which itself had seen a fall of
almost a half (-47%) compared with 2008. Thus, the total net profit of Jersey’s
finance industry, has fallen by 60% in the two years to 2010, and consequently
affected the sector's contribution to the government's coffers.
Profits in the banking sub-sector fell by almost a third (-32%) in 2010 to
GBP350m. Three-fifths (60%) of companies engaged in banking activities recorded
a fall in profits on an annual basis. Over the two-year-period since 2008, banking
profits have declined by 70%.
Profits recorded by the fund management sub-sector fell by about a fifth (-20%)
to GBP70m in 2010. The trust and company administration and accountancy subsectors
recorded similar declines in profit, each down by 19% on an annual basis.
Although the decline in profits recorded by fund management reflects the volatile
nature of global markets in recent years, it is the first time in eight years
that the trust and company administration sub-sector has reported a fall in
annual profits. Estimated profits for trust and company administration (excluding
legal activities) declined to GBP117m in 2010, with more than two-fifths (42%)
of such companies reporting a reduction in profits compared with 2009. This
sub-sector had previously experienced ongoing growth in profits each year since
The legal sub-sector was the only area to report growth in profits in 2010.
Annual net profits for this sub-sector were estimated to have risen by more
than a third (34%) compared with 2009, to approximately GBP50m.
Profit per employee across the finance sector in 2010 was GBP51,000 per full-time
employee, a fall of a quarter (25%) on 2009, reflecting the large decrease seen
in total profits in 2010.
Taxes in Jersey comprise 69% from income taxes, 11% from Goods and Services
Tax (GST), 4% from stamp duty, 9% from impots duty, and 7% from other taxes
and income. Total income tax revenue in 2010 was GBP394m, GBP114m less than
in 2009. The share of contributed by GST revenues is expected to almost double
by 2012 with the increase in the headline rate from 3% to 5%.