Value chain

Jersey cheats impact on global financial value chain

The Channel Islands jurisdiction has described its contribution to global “value chains”, arguing for its existence at a time when IFCs continue to be criticized for their existence.

International financial centers are vying to stand out and, in some cases, to fend off claims that they only exist to allow the wealthy to hide money.

When jurisdictional investors want efficient, fast and robust channels to direct capital in the most lucrative direction, CFIs can be important hubs. And their clusters of commercial, legal and technical expertise develop an autonomous dynamic of their own.

This is the kind of argument that the British crown dependency of Jersey likes to put forward. Jersey Finance, the organization bringing together private and public sector bodies to promote the island around the world, says its network effect deserves more respect. Jersey Finance recently worked with the Center for Economics and Business Research to chart Jersey’s global economic footprint.

The document states that Jersey supported £170.3 billion ($222.9 billion) of global gross domestic product each year over a four-year period between 2017 and 2020. To give an idea of ​​the magnitude of that sum, New Zealand’s direct contribution to global GDP was £172. billion. Jersey administers £1.4 trillion in capital and its business activity supports 5.1 million jobs. Regionally, the jurisdiction supports £62 billion of UK GDP, £31 billion of Rest of Europe GDP (excluding UK and Jersey); £46 billion of Asia and Middle East GDP and £24 billion of North American GDP.

“Jersey facilitates the movement of capital and investment globally. Financial services are an integral part of the range of business functions in the supply chains of all global value chains, including research and development and purchases,” the report said.

Joe Moynihan, managing director of Jersey Finance, is optimistic.

“Despite the continuing difficult conditions, thanks to our resilience and stability as a jurisdiction, Jersey continues to attract new business. This has been possible thanks to Jersey’s experience in international markets, managing executives complex regulatory frameworks and in facilitating cross-border private and institutional capital. Jersey can do all of this by providing a convenient and well-regulated platform,” he said. “There is no doubt that over the next few years, that kind of stability, certainty and experience will be an extremely valuable asset.”

“The disruption caused by Brexit and geopolitical fragmentation, instability in some regions and, of course, the pandemic meant that targeted and impactful investment was needed like never before, not only to rebuild economies, but also to rebuild communities,” he said. continued. “IFCs like Jersey are in a fantastic position to meet this challenge, providing the perfect platform, with less friction and greater oversight, to facilitate the movement of capital and ensure investment can be leveraged. with the greatest impact where it is needed most. The challenge for CFIs right now is to really focus on telling that story clearly, shining a light on the tangible impact they can have. That’s why we commissioned this important study, to analyze the global economic footprint of Jersey’s financial sector and better understand Jersey’s role as an economic conduit within global value chains (GVCs).

not always friendly
Jersey decision makers know that the international environment is not always favorable to CFIs. A few months ago, Jersey Chief Minister John Le Fondré responded with critical comments to US President Joe Biden for the latter’s call for an overall minimum corporate tax rate of 15%. Separately, Jersey, like other IFCs with links to the UK such as the Isle of Man, Guernsey, the British Virgin Islands and the Cayman Islands, is looking to refine its positioning now that the UK is out of of the European Union. With the crackdown on the financial assets of Russian oligarchs, the pressure for all jurisdictions to provide beneficial ownership data remains intense. (However, it also doesn’t remove the need to balance avoiding secrecy without jeopardizing legitimate privacy.)

At the same time, jurisdictions that can demonstrate stability, robust economic growth and quality of life are popular, especially given the geopolitical instability in Europe and parts of Asia.

Jersey can cite hard figures showing its importance as a financial centre: some £225.9 billion of capital is served by the fund industry (based on annual averages from 2017 to 2022); £142.2 billion of bank assets and £1.14 trillion of trust and related capital are administered there.

According to CEBR’s central forecast, the value of intermediated capital in Jersey flowing downstream to Asia (including the Middle East) will see a doubling between 2020 and 2030, rising to £610 billion. In North America, it will increase by just over 50% to reach £300 billion in 2030 from 2020. As far as the UK-related market is concerned, the rise in intermediation will be less dramatic , at 24% over the 10 years to 2030, CEBR said. The UK will still be Jersey’s largest source of capital allocation by 2030, supporting around £650bn.

Moynihan of Jersey Finance adds: “There is no doubt that CFIs will continue to be challenged in the years to come, often due to misunderstandings or misplaced stereotypes. Searches like this
[report] will be invaluable. It’s about pooling capital and facilitating the flow of investment around the world and creating positive change, at a time when positive change is truly needed. It’s not about moving money without impact; it’s about driving growth, providing jobs and wages for people around the world, helping build infrastructure, and supporting real people in real communities. Going forward, this kind of investment support will be critical to our collective global prosperity.

Criticism of IFCs continues, with even ‘onshore’ jurisdictions such as the UK being criticized for ‘leaking’ billions of pounds and the like. This argument resurfaced here, prompting backtracking.