The State of Britain

IOM | GIB | CI

More normality on the Isle of Man sees the unemployment rate hold steady, the pandemic yet to impact economic data on the Rock and unemployment in Guernsey drops

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Isle of Man

Inflation as measured by the Consumer Price Index stood at 0.1% for July 2020, up from -0.3% in June 2020. At 0.7% recreation and culture was the biggest contributor towards the increase compared to the same time last year. All products within this category experienced an uplift in prices compared to July 2019, with internet subscriptions increasing by 13.7% and pet care by 8.8%.

On the Isle of Man labour market, the number of registered unemployed increased by 766 compared with July 2019. This meant the rate for July 2020 was 2.6%, the same as the previous month.

On earnings, median gross weekly pay of full-time employees was £593 in 2019 with full-time employees working an average of 37.9 hours per week, including 1.2 hours of overtime.

Overtime, incentive pay and shift premia made up 6.7% of employees’ gross weekly earnings up from 6.3% in 2018. Median Isle of Man earnings were 1.4% higher than the median UK earnings.

On the Island, 15.7% of employees in 2019 earned less than the Living Wage, up from 11.2% and 14% in 2018 and 2017 respectively and 3.1% of employees earned the Minimum Wage down from 3.4% in 2018.

Gibraltar

At the end of August there were 51 active cases of COVID-19 in Gibraltar. The Territory has had 270 confirmed cases of COVID-19 and no deaths at all. Gibraltar has largely returned to normal including open bars (with some restrictions) and limits on the size of private gatherings.

There is little data on the impact the pandemic has had on the Rock’s £2.3bn economy, with the latest figures showing unemployment (Dec 2019) at an all time low of 40 but inflation (April 2020) has dropped to 0.6%. The latest GDP figures (2018/19) showed the economy grew at 5.9%. Gibraltar’s GDP is calculated annually.

Channel Islands

In Jersey the number of people looking for work was 2,000 in June; this is 990 higher than at the end of the previous quarter and 1,130 higher than a year earlier.

On property, on a rolling four-quarter basis, the mix-adjusted average price of dwellings sold in Jersey during the year ending Q2 2020 was 1% higher compared with the previous quarter but the turnover of properties was 56% lower than in Q2 2019 and 32% lower than in Q1 2020. Q2 2020 saw the lowest quarterly turnover for more than 7 years, since Q1 2013.

This meant the mix-adjusted average price of properties sold in Jersey was £584,000 which compared with £460,000 in Guernsey.

House prices in Guernsey were 3.5% higher than in the previous quarter and 7.5% higher than in the corresponding quarter of 2019. Turnover in Guernsey during the second quarter of 2020 was 19% lower than in the previous quarter and 38% lower than in the corresponding quarter of 2019.

During the week ending 1st August 2020, 2.7% of the workforce (856 people) were unemployed in Guernsey compared to a peak of 5.2% (1,631 people) at the end of May 2020.

Median earnings as at 31st March 2020 were £34,409 higher on the island which, when compared with a year earlier, was 2.6% higher in nominal terms and 0.6% higher in real terms.

Normality on the Isle of Man, the pandemic yet to impact economic data on the Rock and a fiscal surplus in Guernsey is timely

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The Isle of Man has no remaining active cases of coronavirus. Twenty-four people have died on the island but the last positive case of the virus was recorded on 20 May.

The island became the first place in the British Isles to scrap social distancing and lockdown restrictions. Since 15 June islanders have been able to visit pubs, restaurants, shops and gyms and children returned to school.

Whilst travel to the island remains largely prohibited, a Guernsey and Isle of Man ‘air bridge’ will operate from July. Travellers between the islands, which are both currently Covid-19 free, will not have to self-isolate.

Economic data to May 2020 reflects the impact of the pandemic on the Island although unemployment eased slightly compared with April 2020. The rate for May 2020 was 3.0%, a drop of 0.1% from the previous month.

On inflation, as measured by the Consumer Price Index, the rate stands at 0.1% for May 2020, down from 0.8% in April 2020. Three main sectors contributed to the decrease, clothing/footwear, transport, and housing/water/electricity/gas/other fuels.

Gibraltar

At the end of June there were no known active cases of COVID-19 in Gibraltar. The Territory has had 174 confirmed cases of COVID-19 and no deaths at all. Gibraltar has largely returned to normal including open bars (with some restrictions) and limits on the size of private gatherings.

There is little data on the impact the pandemic has had on the Rock’s £2.3bn economy, with the latest figures showing unemployment (Dec 2019) at an all time low of 40 and inflation (Jan 2020) barely moving to 1.1%. The latest GDP figures (2018/19) showed the economy grew at 5.9%. Gibraltar’s GDP is calculated annually.

An indication of the impact, however, is given by the number of passengers and crew from cruise liners who disembarked in May 2020; nil compared with 36,000 in May 2019. Revenue from the Upper Rock tourist sites for example, was c£600K in April 2019 compared with c£90K in March 2020.

This month Chief Minister Fabian Picardo confirmed that the Rock had had virtually no income for c3 months and had tripled its expenditure.

He stated the Government had drawn down £90m from a £150m facility arranged with the Gibraltar International Bank.

In his Emergency Budget in March, the Chief Minister said the Government would borrow up to £500m in order to put in place measures to protect local businesses and deal with the Covid public health emergency.

Mr Picardo said the Government preferred debt as it would earn more on its reserves than it would pay in interest on this borrowing.

Channel Islands

At the end of June there were no known active cases of COVID-19 in Jersey and in Guernsey.

 Economic data has now begun to reflect the impact of the pandemic on the islands.  

The total number of people registered as seeking work in Jersey in June was 2,050. This is 70 lower than a week earlier but 1,220 higher than at the end of the comparable week in 2019.

In Guernsey during the week ending 30th May, 5.2% of the workforce (1,631 workers) were wholly unemployed compared to 5.0% at the end of April and 1.6% at the end of March. During April 2020, the total number of people registered unemployed reached a peak of 2,374 (7.5% of the workforce).

A ‘revive and thrive’ recovery strategy from the coronavirus pandemic has been published by the Guernsey government. Currently the States has agreed to invest up to £650m of which a £225m short-term borrowing arrangement has been agreed with local banks.

Economic modelling has projected a loss of c£300m to the economy in 2020, 8% of the total, which could take 10 years to recover from without fiscal stimulus.

Key initiatives will be completing the review of air and sea links, including clarifying state owned airline Aurigny’s role as an ‘economic enabler’; investing in infrastructure and regeneration projects; reviewing the population management regime to enable recruitment of skilled workers and overhauling telecommunications infrastructure and reviewing 5G provision

The future position of Aurigny was already under review after the company announced losses of £7.6m last year, about £3m higher than previously forecast. Overall the airline received a £9.7m bailout from the States.

Guernsey’s finances were in good shape prior to the pandemic after a £105.6m surplus in 2019 was reported in government accounts. This represented a significant improvement from a 2018 deficit of £16.2m. The turnaround was due to investment returns of £86.3m and a £25.6m increase in tax revenue.

Guernsey has built up £195m in government reserves, £100m of which will be used to fund the recovery alongside the £550m in borrowing as stated above.

Lockdown sees a sharp increase in unemployment on the Isle of Man, the pandemic yet to impact economic data on the Rock and the Channel Islands

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The Isle of Man has had 336 confirmed cases of COVID-19 of which seven are active.

Economic data to April 2020 has begun to evidence the impact of the pandemic on the Island with unemployment increasing by 1,033 compared with April 2019. This took the rate for April 2020 to 3.1%, an increase of 1.1% from the previous month.

On inflation, as measured by the Consumer Price Index, the rate stands at 0.8% for April 2020, down from 1.8% in March 2020. Three main sectors contributed to the decrease, clothing/footwear, transport, and housing/water/electricity/gas/other fuels.

Clothing/footwear and transport were the two most significant contributors, each responsible for -0.4% of the decrease in the 12-month rate. All men’s, women’s and children’s outerwear prices decreased compared to the same month last year.

Within transport, both air and boat fares have been set to 0% due to lock down measures imposed in response to COVID-19, as most people who leave the Island cannot freely return, rendering current prices invalid for the purpose of calculating inflation.

Prices for other travel costs and petrol/oil fell by -19.4% and -9.5% respectively. 

Gibraltar

With 147 confirmed cases of COVID-19 of which only two are active, and no deaths at all, Gibraltar is returning to normal. A restriction on the size of gatherings remains in place with the limit set at 12 people.

There is little data yet on the impact the pandemic has had on the Rock’s £2.3bn economy with the latest figures showing unemployment (Dec 2019) at an all time low of 40 and inflation (Jan 2020) barely moving to 1.1%. The latest GDP figures (2018/19) showed the economy grew at 5.9%

An indication of the impact, however, is given by the number of passengers and crew from cruise liners who disembarked in March 2020; 2,554 compared with 9,786 in March 2019.

But in a sign of confidence returning to Gibraltar, a local consortium has confirmed plans to invest £30m in building 45 low rise town houses and villas at North Gorge. It followed a meeting between the Chief Minister, Fabian Picardo, and Patrick Heffron, founder of the UK-based Neptune Group.

Channel Islands

There are four active cases of COVID-19 in Jersey. In total there have been 307 cases and 29 deaths.  There have been no new confirmed cases of COVID-19 in Guernsey since the beginning of May. In total there have been 252 cases and 13 deaths.

There is little data yet on the economic impact the pandemic has had on the Channel Islands.

On inflation, in the twelve months to March 2020, prices in Jersey (which uses RPI) increased by 0.2% to 2.7%.

The largest contributors were the housing, household services and leisure services groups. In contrast, the cost of clothing & footwear decreased, resulting in a downward contribution to the inflation rate.

Inflation in Jersey over the twelve months to March 2020 was 1.2% higher than the comparable RPI headline rate of inflation for the UK.

Guernsey’s annual inflation rate as measured by the RPIX (excludes mortgage interest payments) was 2.5% in March 2020. This is 0.1% higher than in the previous quarter and 0.4% higher than in March 2019. The equivalent RPIX figure for March 2020 for the UK was 2.7% and for Jersey, 2.6%.

As in Jersey, the leisure services group contributed most at 1.1% with the housing costs group contributing 0.7%.

If RPI is used to measure inflation in Guernsey, the figure is 2.1% which compared with 2.6% in the UK and as stated above 2.7% in Jersey.

Another release of stats showed Guernsey’s total population increased by 0.7% or 469 people over the year ending 30th June 2019. Over the years ending 30th June 2016, 2017 and 2018, the annual changes were 0.1%, -0.3% and 0.5%.

On employment figures, in December 2019, 3,014 people were self-employed and 28,346 people worked for an employer on the Island. The finance sector provided 6,111 jobs or 18.7% of the total.

Also on the labour market, median earnings at 31st December 2019 were £34,160, which compared with a year earlier was 2.7% higher in nominal terms and 0.4% higher in real terms.

On house prices, the average purchase price for Local Market properties in Guernsey was £444,150 in the first quarter of 2020, 0.6% higher than the previous quarter and 4.4% higher than the first quarter of 2019. There were 174 Local Market transactions during the first quarter of 2020, 17 fewer than the previous quarter and three fewer than the same quarter of 2019.

The median price of the 17 Open Market transactions in the first quarter of 2020 was £1,365,000 compared with £1,291,875 in the first quarter of 2019, when there were 18 transactions.

House prices a record high in Jersey, more Brexit fallout on the Rock, and the Isle of Man Budget

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The average house price in Guernsey for local market properties rose by 0.8 over the course of 2019. The price was £441,295 in the fourth quarter of 2019, up from £437,909 in 2018. There were 830 local market houses sold in 2019, 20 more transactions than in 2018.

The median house price in Guernsey for open market properties was £1.5m, down from £1.4m in 2018. There were 67 open market houses sold in 2019, nine fewer transactions than in 2018.

Values have been more bullish in Jersey, where average house prices have reached the highest in the island’s history. The Jersey House Price Index showed the average property cost £518,000 at the end of 2019, up 7% from £484,000 in 2018 with the average four-bed property now costing more than £1m. Transactions were stable compared with 2018, due to increased sales of flats but decreased sales of houses. Housing affordability decreased on an annual basis with all property types being less affordable to purchase than in 2018.

Comparing like with like, average prices in Jersey stand at £537,000 in contrast to £478,000 in London. Using the same measure, average UK prices are £234,000 and in Guernsey the average is £441,000.

Also in Jersey, the Better Life Index, which was first produced and published in 2013, has been released for 2018. The OECD measure assesses social and environmental, as well as economic factors.

Jersey had an overall Better Life Index score of 6.6 (out of 10), ranking the island 19th out of 41 nations. This placed the island above the OECD average but below the UK and France. Jersey remained the same overall rank as in 2018 and was ranked in the top ten for jobs and earnings, health status and community but ranked bottom for civic engagement. 

Gibraltar

According to the Financial Secrecy Index – published by international campaign group the Tax Justice Network – Gibraltar is now ranked 30th in the world, up from 83rd, while the UK has risen from 23rd place to 12th. The Tax Justice Network says its index ranks countries on how easy it is to hide and launder money.

The increase in the volume of financial activity conducted on the Rock by non-residents is a key factor in the higher ranking (rather than lighter regulation) but Gibraltar did score badly on twelve indicators: including public company ownership and accounts, avoiding promoting tax evasion, and its trust and foundations register. The UK Treasury does not recognise the basis for the Tax Justice Network’s assessment.

Financial services firm the GSX Group is to expand into Estonia, transferring its business, customers and technology to a different company-GBX Estonia. The firm will keep its headquarters in Gibraltar but will surrender its licences and will no longer be regulated by the Gibraltar Financial Services Commission. CEO Nick Cowan says the group needs a presence in Europe with Estonia being the jurisdiction of choice because of its progressive approach to Distributed Ledger Technology.

Also on Brexit, the first meetings of the committees established under the Withdrawal Agreement on the departure of the UK and Gibraltar from the European Union took place in Algeciras.

The departure of Gibraltar from the EU will be executed utilising the Gibraltar Protocol to the UK-EU Withdrawal Agreement, the four Memoranda of Understanding and an International Tax Treaty. These MoUs and the committees established under them largely come to an end on 31 December 2020 in line with the transitional period.

On development, plans for 111 apartments and car parking spaces on the site of the Old Casino have received full planning permission. Also updated plans for a ‘Forbes 1848’ development on Devil’s Tower Road were unanimously approved by the Development and Planning Commission. The 16-storey Forbes development was given the go-ahead and will be built on the site of the old Ready Mix site.

IOM

The annual rate of inflation as measured by CPI increased in January 2020 to 2.6% up from 2.1% in December 2019. Transport was a key driver of inflation and air fares plus petrol/diesel were also up. Prices for clothing and footwear dropped and price rises in food and non-alcoholic beverages also slackened but not enough to prevent the 0.5% jump.

On the labour market, the number of registered unemployed on the island increased by 36 compared with January 2019. This left the unemployment rate for January 2020 unchanged from December at 0.9%.

Treasury Minister Alfred Cannan has outlined the Manx Budget. Government spending for the year is projected to be £1.07bn, up £29m on the previous year.

The spend of £541m on capital projects between 2019 and 2024 include:£1.5m for a fibre optic network; £6.8m for airport ground surfaces refurbishment; £1.4m for a runway instrument landing system; £1.4m for bus replacements; £4.5m for heritage railway renewal and a TT race timing system.

Continued funding for the Douglas Promenade Refurbishment and a new ferry passenger terminal in Liverpool were also confirmed. There was also an extra £11m to fund initiatives such as the removal of silt from Peel Harbour and marketing the island overseas.

To pay for it all. a 5% increase in the NI upper earnings limit will mean c3,500 people pay up to £202 more and overall those earning more than £42,000 will be up to £78 worse off. Personal allowances go up £250 to £14,250, meaning 465 islanders will no longer pay any income tax and c41,000 people will benefit from a 10% rise in the earnings threshold for NI, saving up to £74 per person.

The Channel Islands’ credit rating improves, Gibraltar passes the EU Withdrawal Bill and Flybe’s rescue welcomed on the Isle of Man

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Last month in the UK, the ONS published its 2018 full year estimate of economic activity by UK country, region and local area using gross domestic product. UK GDP per head was £31,976. In terms of extremes, GDP per head was £395,309 in Camden and the City of London and £15,034 in Ards and North Down in Northern Ireland. In comparison, Jersey GDP per head is £43,000, Guernsey £53,000, Isle of Man £57,000 and Gibraltar £70,000.

Channel Islands

Jersey’s Retail Prices Index (RPI), which measures inflation on the island, increased by 2.5% during the 12 months to December 2019; the lowest rate since June 2017 and down on the 2.7% in the previous quarter. Key drivers were tobacco, up 6%, plus alcoholic drinks and leisure services increased by 4.2%. Travel fares fell by 3.5% and household goods by 1.1%.

Inflation in Guernsey is measured by the Retail Price Index (RPIX), which excludes mortgage repayments. The island’s inflation rate was 2.4% to December 2019, up by 0.4% on the previous quarter. A 9.3% fall in travel fares did not offset a 5% increase in the cost of fuel or a 4.9% increase in the cost of alcohol, plus a 3.4% rise in tobacco prices amongst others.

New figures show Guernsey’s population reached 62,792 at the end of March 2019, the increase of 459 people was the biggest in 8 years. The most recent electronic census showed the employment rate had hardly moved with a decrease of 0.03% at the end of September 2019. Women were recorded as earning £30,578 on average, compared to £37,124 for men.

The Channel Islands’ credit rating has improved from negative to stable following Boris Johnson’s emphatic election victory. Credit rating agency Standard and Poor’s improved its outlook for Jersey and Guernsey, citing greater stability in UK politics and clarity over Brexit.

On transport, the UK government’s recue of Flybe avoided unwelcome disruption to the Island’s connectivity although Flybe did confirm Guernsey will be losing its air link to Heathrow from April. Last year, Guernsey paid Flybe a subsidy of £28 per passenger to keep the route running from March to October.

Also, Channel Islands-based airline Blue Islands has cancelled its routes from Guernsey to London Southend and Liverpool which began in May. Blue Islands blamed the deregulation of Guernsey’s airspace which means airlines do not need an air transport licence to fly to and from the island.

Guernsey’s new open skies policy is now similar to that in Jersey, where the number of passengers travelling through Jersey Airport reached 1.7m in 2019, the most since 1995. Numbers have increased by c275,000 in six years. Interisland services between Jersey, Guernsey and Alderney also saw a 17% rise in passenger numbers in 2019, the extra 15,000 passengers took the total to 105,328.

Gibraltar

Uniquely Gibraltar was the only British Overseas Territory in the European Union, consequently The Rock’s government passed the European Union Withdrawal Bill for Gibraltar, after the UK bill was approved by a large majority by Boris Johnson’s new government.

The law provides the mechanism to implement in Gibraltar the withdrawal agreement reached by the UK and the EU and covers the implementation period, citizens’ rights, and the retention and adaptation of EU law.

Following an initial delay caused by the formation of the new Spanish government, meetings in Madrid took place between the governments of Gibraltar, the UK and Spain to discuss the implementation of the Memorandums of Understanding (MoUs) which deal with the withdrawal.

The MoUs will apply throughout the Brexit implementation period from the start of February to the end of December, and that during this period, EU law will continue to apply to Gibraltar.

Gibraltar’s Legislative Reform Programme contained in the new Financial Services Act has come into force. The joint initiative between the Government and the Financial Services Regulator includes changes to enforcement, the engagement of inspectors, and restrictions on publication.

The new Act also gives the Minister for Commerce greater powers over the Financial Services Commission executive, including the power to remove its CEO, and sees the creation of an independent Decision Making Committee for disputes. It also aligns Gibraltar with UK regulators.

The reform follow a lawsuit against the FSC, it’s former CEO, and Director of Legal, Enforcement & Policy in 2018, relating to comments made in a press release issued on the Commission’s website, the day after Enterprise Insurance went into provisional liquidation.

IOM

Citing connectivity as the key reason why the UK government has kept Flybe airborne, nowhere is this more keenly felt than on the IOM, where the airline has a contract to transfer NHS patients from the island to medical facilities in Liverpool when specialist treatment is needed.

Last autumn Flybe announced plans to fly between the Island and London Southend for the first time in 2020. The airline also confirmed plans to end its service to London Stansted, less than a year since it was launched. In September the company announced it would shut down its Isle of Man base by this summer.

On development, work on a 55,000 sqm temporary silt lagoon to hold c44,000 tonnes of material from Peel Marina, including cadmium and lead, has started. The c£1m project will be undertaken in two phases.

The government has announced a plan to produce 75% of the island’s electricity from renewable sources by 2035 with most power likely to come from on and offshore wind turbines, although options for tidal and solar power energy generation will also be explored.

The plan includes a ban on all peat cutting, repairing up to 1,000 acres of peatland and the planting of an 85,000-tree woodland. At least £10m will be earmarked for the first phase in the 2020-21 budget with an estimated £25m of investment by the government each year matched by funding from the private sector. The Isle of Man’s should achieve net zero carbon emissions by 2050.

With the UK’s interventions in airlines and railways topical, the Public Accounts Committee’s enquiry into the Isle of Man’s taxpayers’ foray into the film industry rumbles on. The Isle of Man government put £60m into the film industry via the island’s Media Development Fund between 2007 and 2016; £32m has so far been returned from the investments.  This month treasury minister Alfred Cannan has rebutted accusations that the Manx government made mistakes when investing, stating that there was adequate due diligence.

Growth in the Isle of Man economy falls sharply, inflation remains relatively high in Jersey, and the Gibraltar Chief Minister highlights the Rock’s economic success to a London audience

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The Isle of Man’s key annual report measuring the Island’s economic performance was published this month.

In 2018, GDP increased in real terms by 3.6% on an annual basis, to £5.3bn. This compared to a real term increase of 7.4% in 2017.

E-Gaming and insurance were the main drivers of growth and other professional services also contributed. E-gaming grew 18%, agriculture declined 30% and tourist accommodation fell 21%.

In terms of the sector share of the economy, EGaming had 21.1%, followed by Insurance 17.6%, ICT 9.1% and Other Financial and Business Services 8%.

Unemployment on the Isle of Man increased by 0.1% in October to 0.8%. In comparison, Northern Ireland recorded the lowest rate in the UK at 2.5% with the overall UK rate at 3.8%.

On economic development, an Island urban regeneration scheme targeted at designated streets in town and village centres will be revamped. Previously funding applications had to be approved by individual regeneration committees and the Chief Minister’s steering group. Now businesses can apply for funding directly from the Department for Enterprise, cutting out layers of bureaucracy. Since 2009, £13.4m has been used to fund 223 projects.

A £60m fund has been set aside to pay for flood defences across the Isle of Man. Severe flooding in 2015 found 11 areas of the Island to be at high risk, and heavy rain in October caused severe flooding in many areas.

On transport, a new £38m ferry terminal connecting Liverpool and the Isle of Man will not be completed until July 2021. Initial work on the Merseyside site has started, but planning approval is required for a new link road and dredging of the riverbed.

In the air, low-cost airline Flybe, has announced plans to fly between the Island and London Southend for the first time in 2020. The airline has also confirmed plans to end its service to London Stansted, less than a year since it was launched.

Flybe was bought by the consortium Connect Airways earlier this year and services will be run by Stobart Air. The company announced in September it would shut down its Isle of Man base by summer next year.

Channel Islands

Jersey’s RPI (Retail Price Index) decreased 0.1% to 2.7% during the 12 months to September 2019. Almost all groups saw prices increase, with housing, household services, leisure services and food groups being the largest contributors. However, housing, and household and leisure goods, recorded lower rates of price increases relative to the previous period. The cost of food, and of fares and other travel, added to the inflation rate.

CPI (Consumer Price Index) inflation in Jersey over the 12 months to September 2019 was 0.8% greater than the comparable measure for the UK (1.9%)

Jersey’s latest property index has shown the average price of housing sold in Jersey during the quarter ending Q3 2019 was 2% higher than the previous quarter, an uplift of 8% annually.

On unemployment, the total number of people registered as actively seeking work was 30 lower than at the end of the previous quarter and 50 lower than at the end of the corresponding quarter in 2018 (Q3 2018). The non-seasonally adjusted total unemployment was 920.

In Guernsey, there were 296 people registered as unemployed. The rate of 1% was the same as the previous year. Median earnings as at 30th June 2019 were £33,622 which, compared with a year earlier, was 2.8% higher in nominal terms and 0.9% higher in real terms.

At the end of September 2019, Guernsey’s annual inflation, as measured by the changes in the RPIX, was 2.0%. The RPIX, which excludes mortgage interest payments, is the Island’s preferred measure of inflation.

The RPI change in September 2019 was also 2.0%. This compares with 2.4% in the UK and 2.7% for Jersey. Key drivers were leisure, up 0.9%, and housing costs up 0.4%.

Gibraltar

Two Memorandums of Understanding have been signed by the Gibraltar and UK Governments.

As a result the UK has agreed to underwrite some Brexit contingency projects on the Rock. Funding for an access ramp at the port at a cost of £390,000, and waste disposal machinery at a further £862,000, will be met by the UK. The objective of the ramp project is to provide Gibraltar with greater resilience by sea in the event of a difficult border.

Also, in all post-Brexit bilateral deals the UK does, Gibraltar will be given an opt in or opt out, depending on whether it will benefit the Rock’s economy, according to Business Minister, Sir Joe Bossano.

In London, a Gibraltar delegation visited the World Travel Market at the ExCel, and the re-elected Chief Minister addressed a financial services lunch at the Gherkin.

During his speech, Mr Picardo pointed out the increase in the Rock’s GDP from £1.2bn in 2011 to over £2.4bn now, and highlighted a GDP to net debt ratio of c12%. Unemployment in the Territory stands at 37.

The Chief Minister said his new Government’s Post Brexit Economic Plan estimated 15% growth over the life of the next Gibraltar Parliament.

In a vote of confidence in the Rock, and despite Brexit uncertainty, the new look Morrisons Gibraltar officially opened on Thursday after a £6m upgrade. On tourism, the Sky Princess cruise ship had its inaugural visit to Gibraltar. The liner is on its maiden cruise and disembarked 3600 passengers and 1400 crew on the Territory.

Jersey’s latest GDP figures published, incumbent Chief Minister Fabian Picardo re-elected in Gibraltar and a big drop in inflation on the Isle of Man

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Jersey’s key annual report measuring the islands economic performance was published this month.

In 2018, GDP increased by 1.8% on an annual basis to £4,642m. This was £43,470 measured by GDP per head of population, an increase of 0.6% in real terms.

The headline figure was reasonable but comparatively the stats were not good over the most recent 5 year period. Since 2013, GDP per head of population has increased by 1% in Jersey and by 7% in the UK, but most significantly by 12% in nearby Guernsey.

Like the UK, the productivity puzzle has been a key factor in the Island’s mediocre performance. The most recent figures showed productivity was unchanged in real terms on an annual basis.

The finance sector saw productivity increase by 1% but his was offset by the non-finance sectors which overall saw productivity decrease by 1%

Productivity has fallen by a whopping 23% since the previous peak in 2007, driven largely by a one third decline in the productivity of the finance sector. Productivity in the non-finance sectors has declined by 6% since 2007.

To June 2019 there was a 0.1% fall in the annual rate of inflation to 2.8%, the lowest rate for two years. A fall in housing and household costs explained most of the drop.

A £70m project to build a Premier Inn Hotel and 144 flats in St Helier have been approved. The island’s second Premier Inn is expected to be completed by 2021, with the flats ready by 2022.

In Guernsey, the number of tourists staying between July and September was up by 4% from the same period in 2018, according to Visit Guernsey. There were nearly 2,600 more visitors staying on the island overnight, which accounted for 11,500 additional nights in paid accommodation.

The reopening of the Victor Hugo House and an accompanying marketing campaign in France saw visitor numbers from France grow by a colossal 94% to just under 16,000.

These achievements were marred a little by the weather, which caused a 22% drop in the number of cruise ship and private yacht passengers disembarking. Overall, visitor numbers were down by 5% to 184,000 in the period.

A £30m cable linking Guernsey to Jersey has been laid and will restore Guernsey to the European grid next month, after the island has burnt oil for more than a year.

Once it is operational, Guernsey will be supplied mostly by French nuclear and renewable energy.

A second project to install a cable linking the island directly with France by the mid-2020s is estimated to cost £85m and is likely to need some public funds.

Gibraltar

The GSLP Liberals will govern Gibraltar for another four years after winning the General Election with 52.5% of the vote.

The GSLP Liberal Alliance is a centre-left political alliance formed by the Gibraltar Socialist Labour Party and Liberal Party of Gibraltar. The Alliance won 10 of the 17 seats with incumbent Chief Minister Fabian Picardo topping the poll.

The government’s economic plans aim to make Gibraltar’s economy ‘future proof’, despite Brexit and slow growth in the UK, where most of the customers for Gibraltar businesses are based.

Ministers intend to reposition the Rock’s economy again similar to the 1980’s switch when the closure of the Dockyard and the reduction of the MOD’s presence impacted the economy. Online gambling firms have recently relocated part of their operations to Malta due to Brexit uncertainty.

Minister for Economic Development, Sir Joe Bossano, predicted a growth rate of 15% over the four year cycle which would take the size of the economy from c£2.6bn to £3bn.

The government will explore an investment in Modern Methods of Construction for new buildings (assembled on site like lego), land reclamation and more solar power.

A Double Tax Agreement has been reached by the Governments of Gibraltar and the UK. Both Governments said the deal will promote trade and investment, help tackle tax avoidance and allow for no-deal Brexit planning.

A vote of confidence in the Rock from Spanish supermarket chain Eroski, which is to open its third Gibraltar store in Midtown. Opening in early 2020, the store will be around 20% larger than the Eroski City store at ICC.

Isle of Man

Unemployment in the Isle of Man fell by 0.1% in September to 0.7%. In comparison, the South West of England continued to record the lowest rate on the UK mainland at 2.4% with the overall UK rate at 3.9.

The annual rate of CPI inflation decreased in September 2019 to 1.1%, down a huge 1.4% from 2.5% in August 2019. The reduction was caused by price drops in clothing and footwear, housing, water, electricity, gas and other fuels and transport. Petrol and oil was the biggest contributor to the decrease in prices in transport.

Evidence to the Tynwald’s Public Accounts Committee continued into the Isle of Man government’s £60m ‘investment’ into the film industry.

The investments included the 2008 feature film Me and Orson Welles, starring Zac Efron, which lost taxpayers more than £9m and the animated feature Chico and Rita, which also lost the public purse £2.8m.

Overall the Committee is investigating £27m of losses from the island’s Media Development Fund between 2007 and 2016.

A former government minister said changes to UK tax relief on films and the 2008 credit crunch recession had ‘an impact on projections’. In 2012, the then UK Chancellor George Osborne, announced tax breaks for films made in the UK would be extended to high-end television projects and animated features.

The new rules meant companies could claim back 25% of their UK production costs, provided projects qualify as British under a cultural test; the changes rendered some production in the Isle of Man less competitive.

Gibraltar elections, tidal power in Alderney and the Isle of Man’s taxpayers’ foray into the film industry

Reading Time: 4 minutesGibraltar

The UK Government has tabled regulations to ensure a continuation of financial services passporting rights between the UK and Gibraltar. Gibraltar-based financial services firms will continue to have access to UK markets in the event of a no-deal Brexit.

There was embarrassment when Gibraltar airport closed shortly after the Territory announced a major PR campaign in London entitled ‘Gibraltar is open for business.’ All flights to and from Gibraltar were diverted or cancelled for a day after air traffic control was closed due to staff sickness. Two inbound flights from Gatwick were diverted to Malaga, while the service linking the Rock to Casablanca via Tangier was cancelled. The company that runs air traffic control in Gibraltar under contract to the Ministry of Defence apologised for the disruption but the Government acknowledged that the closure had been harmful to Gibraltar’s reputation, especially during a period of Brexit uncertainty.

In a reflection of the changes in the banking industry rather than Brexit, Leeds Building Society is closing its Main Street branch which it opened in 2002. The Society will continue to support existing mortgage customers from the UK until they refinance but savers will need to make alternative arrangements.

The Governor of Gibraltar accepted Chief Minister Fabian Picardo’s request to dissolve parliament and call an election for 17 October 2019. Picardo has been Chief Minister of Gibraltar and Leader of the Gibraltar Socialist Labour Party since 2011. In the last election, Picardo’s Labour/Liberal alliance won 68% of the vote and 10 of the 17 seats. Picardo and his deputy found time to participate in the UK party conference season, attending the gathering of the mainstream parties including the SNP and DUP, and manning the Gibraltar stand when not addressing meetings.

Channel Islands

Guernsey recorded the highest number of second quarter property transactions since 2012 in July, with the Island’s stable political climate one of the key reasons why the number of people seeking to move to the island is on the increase according to Locate Guernsey. The organisation is tasked with bringing high-net-worth individuals to the Island to boost the economy. The quango said it had had more inquiries in the period to mid-August than there had been for the whole of 2018.

Economic enabler the Guernsey Investment Fund has committed more than £19m to 11 projects since launching 18 months ago. The technology focused fund invests in projects and businesses which may benefit the island both directly or indirectly and is underpinned by £25m of taxpayers’ money. Fund manager Ravenscroft has considered more than 100 applications and inquiries since launching, whilst 65 investment opportunities had been rejected or withdrawn.

A replacement undersea electricity cable, connecting Guernsey and Jersey, should be operational by the end of 2019, weather permitting, say Guernsey Electricity. The cable, which is 37.4km long and weighs 77kg per metre, is being installed after reliability issues with the previous cable. Jersey sources power from France via three other undersea cables. Guernsey currently relies on fossil fuel generated power.

More renewable energy, this time in Alderney. Alderney Electricity has entered a joint venture with SIMEC Atlantis which will see a tidal site built in the Raz Blanchard off the coast of Normandy in France. Simec Atlantis said it was also assessing options to ensure the island’s electricity needs were met during slack tide periods when tidal turbines would not be generating power. Currently the island is powered by its own diesel power plant.

On transport, a new summer service from Newcastle to Guernsey will be launched by Loganair and daily flights to Heathrow from Guernsey will continue into the winter season after operator Flybe opted to extend the service. Launched in March, with a £825,000 taxpayer subsidy, the States of Guernsey announced the Heathrow route would only be a trial but since then an estimated 13,000 passengers have used the service. Meanwhile losses at Guernsey’s national airline, Aurigny, continue to mount, with the state owned firm forecasting an annual £7.6m shortfall.

IOM

Evidence to the Tynwald’s Public Accounts Committee showed the Isle of Man government had put £60m into the film industry via the island’s Media Development Fund between 2007 and 2016; £32m has so far been returned from the investments. The investments included the 2008 feature film Me and Orson Welles, starring Zac Efron, which lost taxpayers more than £9m and the animated feature Chico and Rita, which also lost the public purse £2.8m. The Committee heard that more than £20m had been written off while the fund was under the management of CinemaNX and a further £6m was lost under Pinewood Film Advisors. On the upside, a £12m investment in Pinewood shares netted the Manx Treasury £10m profit which offset some of the losses on other investments.

Flybe is closing its base at the island’s airport and handing operations over to partner Stobart Air. More efficient aircraft mean a base is no longer needed at Ronaldsway; two DeHavilland Q400 aircraft will be replaced with ATR 72066s. Once both aircraft are in use, Stobart Air, which brands its services as Flybe, will take over operations. A gradual closure of the base will be completed by the start of summer 2020. Recently Flybe confirmed the route between Ronaldsway and Heathrow was to end next month. The flights were launched in April but were not included in the airline’s winter schedule which suggests insufficient demand. The route mirrored a similar ‘trial’ in Guernsey from where flights to Heathrow will continue into the winter season after Flybe opted to extend the service. The States of Guernsey underpinned the route with an initial £825,000 taxpayer subsidy, since then an estimated 13,000 passengers have used the service and it is not known if a further state subsidy has been offered.

Confirmation that the Rock’s gaming industry is impacted by Brexit and Guernsey’s economic growth slows

Reading Time: 3 minutesGibraltar

On jobs, Bet 365 has confirmed it will retain c100 jobs on the Rock. The company announced in May that it would increase its operations in Malta in order to guarantee access to EU markets. Bet 365 intends to maintain dual regulation and licensing by both Gibraltar and Malta. Headcount in the firm’s Gibraltar offices was 500 but by relocating significant operations to the island this will drop by c80%. More generally, unemployment on the Rock dropped from 57 to 37 over the month.

Despite the setback in the gaming industry, Gibraltar has recently enjoyed relative economic success. This has caused problems for ‘UK’ employed staff – once the mainstay of the economy – who have been impacted by the austerity measures introduced by the UK government in 2010. Employees at MOD Gibraltar, the Gibraltar Defence Police and the Royal Gibraltar Regiment have seen their real pay fall in real terms and fail to keep pace with Gibraltar Government salaries.

Channel Islands

Economic growth in Guernsey was 1.7% between 2017 and 2018, according to new figures from the Island’s statistical office, a drop from the previous year’s 4.6%. The total GDP for the island was £3.3bn (£3.2bn if GVA – which includes taxes and subsidies – is used). On a GVA per capita basis this is £52,500 which is 65% greater than the UK and 29% larger than neighbour Jersey. The finance sector accounts for 41% of the economy. Productivity decreased by 1% from 2017 to c£100,000 per worker. Median earnings as at 31st March 2019 were £33,530 and unemployment is 2.7%.

In Jersey, average weekly earnings were 2.6% higher than in June 2018 driven largely by the public sector (4.8%). The increase was 0.9% lower than the previous period which meant average earnings were 0.2% lower in real terms than in June 2018. Average weekly earnings were £770 per week.

Also in Jersey, the latest House Price Index has shown quarterly prices up 2% which translated to growth of 8% on an annual basis. Over the quarter, transactions were up 19%, the highest figure since at 2010. At £512,000, Jersey prices are £128,000 higher than neighbour Guernsey and £283,000 higher than the UK. Guernsey prices were 0.6% higher than the previous quarter and 4.2% higher on an annual basis. Guernsey recorded the highest number of second quarter transactions since 2012.

In Guernsey, there were 152,462 visitors in Q2, an annual increase of 2%. The half year figures are better though, showing growth of 8% to 184,805 visitors. The increase has been largely driven by a strong cruise ship season supported by increased staying visitors travelling by ferry and air from France, Germany, North America and Australia. Likewise in Jersey, visitor numbers in H1 were 327,000, up by 27,000 or 11% growth.

Isle of Man

The annual rate of inflation on the Island increased in July 2019 to 2.1%, up from 1.8% in June 2019. Key drivers of inflation were recreation and culture, education and transport. The biggest jump was travel costs up by 24.2% and internet subscriptions also increased by 12.5%. The unemployment rate for July 2019 is 0.8%, an increase of 0.1% on the previous month June.

The Manx government is seeking expressions of interest in a new marina, but creating a second marina in Douglas as part of a pier project could lead to the scaling back of a £100m scheme in Ramsey. Moorings at existing marinas in Peel and Douglas can currently accommodate 230 boats, both are owned by the government and are oversubscribed. Two projects have already been mooted for the island, a 400-berth marina, residential units, hotel and yacht club near Ramsey harbour, and at Douglas Bay, a large pier which could accommodate cruise ships with berths for up to 50 yachts.

A new government unit could be created to look at these developments after delays to the Douglas promenade upgrade has identified a need to assess large infrastructure projects. The £25m two-year promenade redevelopment, which began in September 2018, is already about 10 weeks behind schedule and has caused serious disruption to businesses.

Gibraltar hosts the International Island Games, Channel Islands’ inflation ticks up and a new ferry terminal for the Isle of Man approved

Reading Time: 3 minutesGibraltar

Despite not being an island, Gibraltar hosted the International Island Games this month, a competition that gathers athletes from over 22 islands. The Island Games Association has an eclectic membership with many of the islands under British sovereignty. For example, participants include one Greek island, Rhodes, one Spanish island, Menorca and Gotland in Sweden. The 2019 NatWest International Island Games saw over 3000 competitors and officials attend from across the 22 member islands. Gibraltar’s sports facilities were redeveloped throughout 2018 but due to the lack of venues the games did not include archery, cycling, football, or volleyball, which have been in all previous games and were replaced by tenpin bowling, judo, and squash.

Whilst the games have helped visitor numbers, the number of cruise ships visiting Gibraltar has dropped 30% this year according to data from the Gibraltar Port Authority (‘GPA’). Passenger numbers between May and August are down c46,000. The GPA data showed passenger numbers in May were down by 18,672, June by 10,654, July by 1,324 and August is forecast to be down by 16,196 cruise passengers. Reasons why operators have been put off visiting, range from the general deterioration of the Rock’s tourist product, street cleanliness and uncompetitive rises in berthing fees compared to rival destinations.

Channel Islands

The governments of Jersey and Guernsey have announced the annual changes to their retail price index (RPI). Jersey’s RPI increased by 2.8% over the period, while Guernsey went up by 1.8%. In Jersey, housing costs rose by 5.0%, with price increases in house purchase costs, rents, water charges and repairs and maintenance costs. The key upward drivers were rents and the increased cost of house purchases. Leisure services also increased by 4.1%. In Guernsey, leisure services also saw the largest annual increase at 10.0% but this was partially offset by fares and other travel costs which showed the largest decrease at -10.1%.

On transport, Guernsey’s States have voted to introduce a vehicle tax based on distance travelled although the details on how this will operate are unclear. One proposal was to track the distance covered by motorists via GPS devices but this has raised civil liberties concerns. The States current system of fuel duty, where drivers are taxed based on consumption of petrol and diesel contributes significantly to public funds but with the switch to electric vehicles underway, collecting revenues this way is not viable in the medium term.

State owned airline, Aurigny, says Guernsey’s quasi open skies policy – airlines no longer need an air transport licence to fly to and from the island – has created an uneven playing field. The airline is also critical of the subsidy paid to Flybe for its London Heathrow route. Despite this, its annual report has shown in 2018 both its turnover and profits increased.

On development, Travelodge wants to expand to Guernsey as part of a £165m coastal plan, creating 25 jobs on the island. Earlier this year rival Premier Inn obtained planning permission for a 100-bed hotel as part of a £35m development at Admiral Park which is expected to be completed by December 2021.

Isle of Man

The Manx government has approved funding for a £38m passenger ferry terminal in Liverpool, £6.5m more than originally estimated. The terminal will be able to accommodate up to 1,000 passengers and 200 vehicles and is due to open in March 2021. It will be built at Princes Half Tide Dock, about 700yds from the existing terminal at the city’s Pier Head.

Also on transport, the Island’s Ronaldsway Airport could be run at arm’s length from the government, in a similar way to the arrangement with the Steam Packet Company ferry operator. The airport currently makes an annual loss of £3.7m. A plan of the proposed changes will be presented to the Tynwald in April 2020. The airport would remain in public ownership but run on a commercial basis by a private operator, potentially saving taxpayers £1m.

On development, The Isle of Man has been named as the ‘preferred host’ for the 2027 Island Games. Twenty-four island nations take part in the competition, which is held every two years. The Island previously hosted the inaugural games 34 years ago, and again in 2001. The island team performed well in this year’s Games in Gibraltar. Athletes will now have somewhere to stay after the opening of the first hotel run by an established budget accommodation chain. Douglas’s new Premier Inn is a six-storey 85-room development which will complement the Island’s traditional older bed and breakfast-style rooms. Premier Inn has created 35 new jobs.