Jersey Financial Services Sector Profits Up 25%

by Jason Gorringe, Tax-News.com, London

05 July 2007

The total annual profit of Jersey's financial services industry increased by 25% in 2006 compared to the previous year, the States of Jersey revealed in the annual Survey of Financial Institutions.

The survey revealed that the estimated total profit for the jurisdiction's financial sector was GBP1.314 billion (US$2.65 billion) in 2006, with banks accounting for more than four-fifths of this total. The figure represents real growth of 21% between 2005 and 2006. However, in real terms, profit is still 9% lower than in 2000, when profits hit a peak.

In 2006, profits for banks rose by more than a quarter (28%) and by more than a third (35%) for fund managers, to GBP108 million. This latest rise for fund managers was due to increased profits in the majority of firms and also a small number of new companies in this sub-sector. Of the total profit recorded for banks, around three-fifths (59%) was attributed to private banking and two-fifths (41%) to corporate banking.

By contrast, profits for trust and company administrators (including legal firms) and accountancy firms decreased slightly, by 6% and 5% respectively, though this was consistent with fluctuations seen since 1999. Profits for accountancy in 2006 were estimated at GBP19 million, compared to GBP20 million in 2005, but do remain above the level recorded in 2003 and 2004. Profits for trust administrators fell by GBP7 million, largely due to the re-classification of a small number of firms into the banking sector.

Over three-quarters of firms expected profits for 2007 would be higher than in 2006, an even higher level of optimism than expressed in the previous round of this survey. Optimism was high in all sub-sectors, particularly for fund managers.

Profit per employee across the finance sector in 2006 was GBP113,000 per full-time equivalent (FTE) employee, 15% higher than in 2005.

Total expenditure on goods and services by the finance sector was GBP530 million in 2006, almost half of which was spent in Jersey.

The total number of FTE staff employed in the finance sector in 2006 was 860 higher than in 2005, the largest increase since 1997, and the total now exceeds the level seen in 2001 and 2002.

Around 70% of all firms anticipated that staff levels would increase in 2007, with over two-thirds of the largest employers anticipating increased staffing.

Estimated total revenue generated by Jersey’s finance sector in 2006 was some GBP3.3 billion, with banks accounting for three-fifths (59%) of this. Revenue per employee was highest in fund management (GBP1.4 million), with the average for the sector being about GBP286,000. Fees/commissions represented over half (52%) of all revenue, ranging from 97% for fund managers to about a quarter (24%) for banks.

For the first time, in the 2006 survey, companies were asked to estimate the total value of funds which they manage or administer that pass through the UK financial services sector. Not all firms were able to answer this question. However, of those that did respond the estimated total value of such funds was about a fifth of a trillion pounds.

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