Jersey Finance Industry Withstands Crisis

by Jason Gorringe, Tax-News.com, London

28 April 2010

Jersey's government has published a statistical report revealing the effects of the financial crisis on the financial services industry, in terms of its economic activity, its size, and its profitability.

The financial services industry continued to account for more than half of Jersey’s economy by value during 2008, registering a year-on-year increase of 1% on 2007.

The statistics show that over the past nine years, total bank deposits held in Jersey have increased by more than GBP50bn, achieving a peak in 2007, and declining thereafter. The number of bank licences has declined by 26, mainly due to mergers.

In 2008, the annual profit of the banking sub-sector was GBP1.16bn, a fall of 3% (about GBP40m) on 2007. This decrease represents the first fall in profits for this sub-sector for four years.

The total value of collective funds administered from Jersey grew by almost GBP150bn over the nine years to 2008. This figure then dropped by GBP77bn in 2009. In 2009, the Net Asset Value of funds in Jersey fell by 32% to GBP163bn and the total number of funds fell by 11% to 1,287.

Continuing the behaviour seen in the previous year the number of investment business clients decreased by over 1,100 from September 2008 to September 2009. However, the total funds under management increased by over GBP1bn to GBP18.9bn, and the average asset value per client increased by over 16% to GBP1.28m.

The annual total profit of Jersey’s financial services sector in 2008 was estimated at GBP1.52bn , representing a nominal increase of 4% on 2007. This latest annual increase is less than that recorded in each of the previous two years (25% and 12% in 2006 and 2007, respectively) but similar to that seen in 2005.

Profits for fund managers rose by 86% in 2008, to GBP180m. The previous year, 2007, had seen a fall in profits (down by 9%) which had followed a large increase in 2006 (up 35%). Profits for trust and company administration (including legal) increased to GBP159m continuing the upward trend seen in this sub-sector since 2002. Profits for accountancy in 2008 were estimated at GBP24m compared to GBP21m in 2007, representing an increase of 14%.

Increased profits were not seen across the board in this sector, however, with almost half of firms reporting falls in profit compared to the previous year.

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