The State of Britain

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Gibraltar growth drops slightly to a still aspirational 5.9% and greater financial transparency in the UK dependencies begins to have an effect

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Gibraltar

Growth on the Rock dropped by 0.1% to 5.9% in the year to March 2019, the second highest growth rate in the UK and its dependencies. At 2.7% and 0.7% London and Northern Ireland have the highest and lowest growth rates in the UK with the Isle of Man’s latest figures showing 7.4%. The UK growth rate for the same period was 1.5%.

Unemployment in Gibraltar is negligible with 37 Rock inhabitants looking for work. At 2.7% and 5.7% the SW of England and the North East had the lowest and highest unemployment rate in the UK respectively. The UK unemployment rate stands at 3.8%.

Average earnings in Gibraltar have increased from c£569 to £586per week. In the UK average earnings are £623 per week. Gibraltar’s average property price is c£620,000.

With the Rock suffering from the scaling back of online gambling due to Brexit, the Chief Minister said in his budget address that the economy faced challenges, however, GDP per capita of $111,505 still placed Gibraltar third globally. The recent relocation to Malta of much of bet365’s Gibraltar operation highlighted the headwinds facing the economy given that gaming jobs had increased from 1,900 in 2008 to 3,800 in 2018.

The Overseas Territory’s Budget surplus was c£85m with net public debt at £314m or 13.38% of GDP. Opposition politicians claim that structuring major capital projects through government-owned companies gives an unclear view of Gibraltar’s public finances and that if these projects were included then debt is £1.2bn.

Channel Islands

Unemployment in the Channel Islands is low, sub c2% with c1100 islanders looking for work. At 2.7% and 5.7% the SW of England and the North East respectively had the lowest and highest unemployment rate in the UK. The UK unemployment rate stands at 3.8%. The Channel Islands’ average property price is c£480,000.

Net migration into Jersey has been estimated at 1,100 in 2018, an increase of 1%, which compares with 0.4% in the UK. The island’s population has increased by 11,400 since 2008 to reach 106,800, of which 78% were immigrants.

With a view to greater transparency, company records in the Channel Islands will become publicly available by 2023. On that theme, more than £210m belonging to a former Nigerian dictator has been seized from a Jersey bank account. The money was derived through corruption during the presidency of Sani Abacha in the 1990s, according to Jersey’s Civil Asset Recovery Fund. A shell company called Doraville held the funds, which were frozen in 2014. The money will be split between Jersey, the United States and Nigeria.

A controversial new list of corporate tax havens compiled by The Tax Justice scored Jersey and Guernsey 98 out of a possible 100 based on 20 different criteria. The top three are the British Virgin Islands, Bermuda and the Cayman Islands, with Guernsey in 15th place and the Isle of Man in 17th. At 7th, Jersey was higher than Guernsey because of a larger volume of foreign direct investment. The new index is at odds with the European Union’s removal of the Channel Islands from their tax haven grey list in March.

Lloyds Bank has frozen 8,000 Jersey accounts because customers failed to respond to requests to prove their identity. The suspensions came after the imposition of tougher money laundering rules in Jersey.

On development, a Premier Inn hotel is being built in Guernsey. The budget chain has planning permission for a 100-bed hotel as part of a £35m development which includes office space, a restaurant, and a 384-space multi-storey car park. Guernsey’s total bed stock is about 5,000 while the average hotel has 70 beds.

Isle of Man

Unemployment in the Isle of Man remained 0.7% during May with 305 islanders looking for work. At 2.7% and 5.7% the SW of England and the North East had the lowest and highest unemployment rate in the UK respectively. The UK unemployment rate stands at 3.8%.

Company records in the Isle of Man will become publicly available. The beneficial ownership registers, which show the ultimate owner of a company, are currently only accessible by local authorities in the islands. The new plans would see the records made available to the EU, businesses, and the general public by 2023. From 2021 the UK dependencies plan to merge their registers with their EU equivalents with the governments of Guernsey, Jersey and the Isle of Man bringing forward legislation to make their registers publicly available by 2023. Given confidentiality is a benefit for some firms the move could be economically damaging.

Gaming firms hedge their bets in Gibraltar, more tourists visit Jersey and Channel Islands air links improved

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Isle of Man

Unemployment in the Isle of Man remained at 0.7% during May with 305 islanders looking for work. At 2.4% and 5.4% the SW of England and the North East had the lowest and highest unemployment rate in the UK respectively. The UK unemployment rate stands at 3.8%.

Average earnings in the Isle of Man are £724 per week which compares with UK average earnings of £623. The Isle of Man’s average property price is c£253,000. Inflation decreased slightly in May to 1.8%, down from 1.9% in April.

The living wage on the Isle of Man has risen from £8.61 to £9.76 per hour. This compares with £9 in the UK, rising to £10.55 for those living in London. The rate is not enforceable but the Manx government has pledged to maintain this level of pay in the public sector at a cost of c£200,000. The minimum wage of £7.85 per hour for workers aged 18 and over is mandatory.

On development, plans to regenerate a 125 year old marine biology lab at Port Erin have been submitted. Developers want to build a 14-bedroom hotel, 73 flats, a restaurant, bar and exhibition centre on the site, which would also have parking for 159 cars across five levels.

Gibraltar

Unemployment in Gibraltar is c1.0% with 57 Rock inhabitants looking for work. At 2.4% and 5.4% the SW of England and the North East had the lowest and highest unemployment rate in the UK respectively. The UK unemployment rate stands at 3.8%.

Average earnings in Gibraltar are c£569 per week. In the UK average earnings are £623 per week. Gibraltar’s average property price is c£620,000.

Gaming company bet365 – which employs c500 people in the Territory – is relocating most of its operations to Malta. The number of jobs the company expects to retain in Gibraltar is not yet known. Staff have been offered redundancy or the option of moving to Malta. By expanding its Maltese operation bet365 will ensure post-Brexit access into the EU single market for the firm’s Europe-facing business. Gibraltar has secured continued access into the UK market after Brexit so maintaining a presence in the Territory has benefits. In terms of economic development, gaming companies generate wealth via corporate taxes, rents and utilities, and employees spend much of their disposable income in Gibraltar. Likewise, Sovereign Insurance Services, Gibraltar’s corporate and international insurance broker, has opened an office in Malta in order to serve clients in Gibraltar with EU risk exposure.

A regasification terminal which will store LNG shipments delivered by sea before turning the liquefied fuel back into gas ready for use in the Gibraltar Electricity Authority’s new power station is now operational. The terminal on the North Mole has a life expectancy of 30 years.

Gibraltar welcomed the first AIDA cruise ship with the arrival of AIDAstella. The liner is one of seven sphinx class cruise ships and has a capacity of 2,700 passengers and 620 crew. Also on shipping, a planned ferry between Gibraltar and Algeciras has made an inaugural test. The proposed service is part of the government’s no-deal Brexit planning but the delay to Gibraltar’s departure from the EU has allowed more time to explore different solutions.

Channel Islands

Unemployment in the Channel Islands is low, sub c2% with c1100 islanders looking for work. At 2.4% and 5.4% the SW of England and the North East respectively had the lowest and highest unemployment rate in the UK. The UK unemployment rate stands at 3.8%.

Average earnings in the Channel Islands are c£720 per week. London had the highest average earnings of £762 whereas the Northern Ireland had the lowest of £513. In the UK average earnings grew by 3.3% or by 1.5% after inflation.

The Channel Islands’ average property price is c£480,000. Following 313 transactions, Jersey’s property prices increased by 2% in the first quarter to an average of £499,000.

The number of people visiting Jersey rose 3% in 2018 to 725,000 according to figures from Visit Jersey. On the island, tourists spent £268m which was 10% more than in 2017. The island hopes for 1m visitors by 2030.

A list compiled by the Tax Justice Network, has named Jersey (7th), Guernsey (15th), and the Isle of Man (17th) as some of the most aggressive corporate tax havens in the world. The index contradicts the European Union’s removal of the Channel Islands from their tax haven grey list in March and was ‘lacking credibility’ according to Guernsey’s government. Jersey Finance said the island meets – or in some cases exceeds – international tax standards of transparency and cooperation.

Taxes on motor fuel raises c£20m a year in Guernsey, c5% of the States’ total revenues. More efficient cars and electric vehicles are resulting in decreased fuel revenues which have prompted the government to look at a proposed system of motor tax based on distance travelled rather than the amount of fuel burned. Also in Guernsey, new mobile technology will provide data speeds of over 400mbps on some mobile devices and Alderney and Sark now benefit from indoor 4G coverage.

Jersey Airport was the fifth worst for delays in the UK last year, with passengers kept waiting for an average of 16 minutes according to the Press Association. Despite this, a number of new routes are operational to the Channel Islands. Loganair has launched new flights from Guernsey to Bournemouth and from Guernsey to Edinburgh. Channel Islands airline, Blue Islands, has started a twice-weekly route to Liverpool, following the launch of daily flights to London Southend and the expected launch of a Newquay service in June. Also, talks between the States of Guernsey and Flybe to continue its route to and from London Heathrow have taken place. Since April, 2,837 passengers have used the service, justifying discussions about extending the schedule into the winter months.

On development, Jersey’s Fort Regent could be turned into a hotel and leisure complex. The early 19th Century landmark which overlooks St Helier is not available for some functions because of safety concerns. It has remained open for its day-to-day use as a leisure centre. In Guernsey, improvements have been proposed for La Vallette in St Peter Port, as part of the States Seafront Enhancement Area Programme.

A new ferry terminal for the Isle of Man, the Gibraltar Island Games on schedule and Jersey inflation worries

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Isle of Man

Unemployment in the Isle of Man dropped 0.1% to 0.7% during March with 314 islanders looking for work. At 2.6% and 5.6% the SW of England and the North East had the lowest and highest unemployment rate in the UK respectively. The UK unemployment rate stands at 3.9%, the lowest since 1975.

Average earnings in the Isle of Man are £573 per week. In the UK average earnings grew by 3.4% or by 1.5% after inflation. The Isle of Man’s average property price is £253,000.

The Manx government has been granted planning permission by Liverpool city council for a new £31.3m ferry terminal. Subject to Tynwald approval of funding, the facility should open in late 2020. It will be built at Princes Half Tide Dock, about 730m from the existing terminal at the city’s Pier Head.

A 125-year-old marine biology lab which was closed and partially demolished in 2006 will be turned into a hotel, flats and exhibition centre. Developers want to build a 14-bedroom hotel, 73 flats, a restaurant, bar and exhibition centre on the site, which would also have parking for 159 cars across five levels at the former facility in Port Erin.

Gibraltar

Unemployment in Gibraltar is c1.0% with 57 Rock inhabitants looking for work. At 2.6% and 5.6% the SW of England and the North East had the lowest and highest unemployment rate in the UK respectively. The UK unemployment rate stands at 3.9%, the lowest since 1975.

Average earnings in Gibraltar are c£569 per week. In the UK average earnings grew by 3.4% or by 1.5% after inflation. Gibraltar’s average property price is c£620,000.

The Gibraltar Government has confirmed that work to complete venues ahead of this summer’s Island Games is on schedule. Five venues are still under construction with the Island Games due to open on July 6th. The Lathbury and Europa Sports complexes are scheduled to be completed by the end of June with the Special Olympics Complex due to be finished this month. The rifle shooting range and the clay shooting range will be completed in May.

In its recent budget, the Gibraltar Government has allocated c£82m for capital projects on the Rock.

Channel Islands

Unemployment in the Channel Islands is low, sub c2% with c1100 islanders looking for work. At 2.6% and 5.6% the SW of England and the North East respectively had the lowest and highest unemployment rate in the UK. The UK unemployment rate stands at 3.9%, the lowest since 1975.

Average earnings in the Channel Islands are c£700 per week. In the UK average earnings grew by 3.5% or by 1.6% after inflation. The Channel Islands’s average property price is c£480,000.

Although inflation in Jersey has fallen from a high of 4% in December, at 3.6% it was almost double the UK’s rate of 1.9% in March. Increases in the cost of tobacco, motoring and household services were partly to blame, as well as the cost of housing which jumped by almost 5%. Jersey’s government will look at ways of encouraging home ownership, improving the supply and standard of properties and making renting more accessible, as part of a review of the island’s housing market. A recent report found 7,000 new homes needed to be built in the next decade to meet forecast demands.

In Guernsey, islanders face a 6.8% increase in electricity bills following months where electricity has been generated on the island. This is because the 32 mile undersea cable between the island and Jersey needs to be replaced after it failed in October.

Guernsey’s population increased by 0.52% – or 325 people – to 62,734 over the year ending June 2018; the largest increase in total population since 2010.

Winds of force eight with severe gales of force nine due to Storm Hannah caused some sailings of the Condor Liberation – the round trip between Poole and the Channel Islands – to be cancelled. With Jersey expected to have up to 15 cruise ships this summer, the island’s tourist industry is hoping Hannah will be the last storm to visit.

On infrastructure, Guernsey will spend £200m updating its IT systems after UK company Agilisys Limited was announced as its preferred bidder. Other developments on the island include a new quarry planned at the Chouet headland, as the existing site at Les Vardes nears the end of its life. The site was designated as a mineral safeguarding area in the Island Development Plan because of the strategic importance of quarrying to Guernsey. Chouet would have a lifespan of at least 40 years, and about five million tonnes of aggregate could be extracted.

In the air, Guernsey’s States voted against a feasibility study to investigate extending the island’s runway – instead switching funding to work on contingency options relating to the island’s sea links. On Alderney, States owned airline Aurigny is closing its operations control centre and outsourcing to Gatwick; seven jobs will go.

Beneficial ownership registers in focus, Brexit impacts online gambling and Guernsey looks to Nepal

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Isle of Man

Unemployment in the Isle of Man dropped 0.1% to 0.8% during March with 349 islanders looking for work. At 2.9% and 5.2% the SW of England and Yorkshire & Humberside had the lowest and highest unemployment rate in the UK respectively. The UK unemployment rate stands at 3.9%.

Average earnings in the Isle of Man are £573 per week. London had the highest average earnings of £846 whereas the North East had the lowest of £523. In the UK average earnings grew by 3.4% or by 1.5% after inflation. The Isle of Man’s average property price is £253,000.

A proposed amendment to a UK bill – resisted by the Isle of Man Government – on financial services which would have obliged the Crown dependencies to create public beneficial ownership registers by 2020 was dropped this month. The Isle of Man introduced a private beneficial ownership register for companies in 2017; information from the register can be accessed if there is suspected money laundering or tax evasion within 24 hours. In the UK, information about who owns company assets can be accessed by anyone but only law enforcement and tax authorities can access the same information in the Isle of Man.

Forecasts that the Manx government’s pension reserve will be exhausted by 2021-22 initiated a government report which has recommended the creation of a voluntary defined contribution scheme for new starters. The new scheme aims to reduce the annual £45m pensions’ deficit; public sector pensions are unfunded on the Island.

On infrastructure, the new harbour bridge in Peel has been completed ahead of schedule. The 20 week project to replace the timber bridge – built in 1938 – with a concrete deck and steel beams cost c£400,000.

Island transport has been improved after Flybe announced daily flights between the Isle of Man and London Heathrow from 21 April using a 78-seat Bombardier Q400 aircraft; Flybe will operate flights to five destinations from the island this summer.

On the seas, a new 25-year deal between the government and the Isle of Man Steam Packet Company will see foot passenger fares frozen until 2021, more special offer fares introduced, higher winter weekend fares scrapped; and children under 16 and full-time students will travel for half-price. An extra weekly sailing to Liverpool will be added and the plan caters for a replacement vessel for the Ben-my-Chree by the end of 2021 plus a £250,000 refurbishment of the fast craft Manannan. The company – which sails between Douglas and five ports in the UK and Ireland – became state owned in May 2018 but is being operated at arm’s length. The Manannan has resumed daily sailings to Liverpool for the summer.

High profile island finance company Canaccord Genuity Wealth Management will acquire Thomas Miller Wealth Management Limited in a £28m three year deal. Client assets of Thomas Miller and the private client investment management business in the Isle of Man total c£1bn and generated revenue of c£8.4m last year. The deal is subject to regulatory approval.

Gibraltar

Unemployment in Gibraltar is 1.0% with 44 Rock inhabitants looking for work. At 2.9% and 5.2% the SW of England and Yorkshire & Humberside had the lowest and highest unemployment rate in the UK respectively. The UK unemployment rate stands at 3.9%.

Average earnings in Gibraltar are c£569 per week. London had the highest average earnings of £846 whereas the North East had the lowest of £523. In the UK average earnings grew by 3.4% or by 1.5% after inflation. Gibraltar’s average property price is c£620,000.

Gibraltar, the UK and Spain have finalised the terms of a tax treaty that forms part of the package of Brexit agreements relating to the Rock. The treaty should enable the resolution of disputes concerning the tax residence of companies and individuals based in Gibraltar and Spain. Also on Brexit, Spain will continue to accept existing driving licences issued in the UK and Gibraltar for a period of nine months after the Brexit date and UK / Gibraltar flights will continue to be able to fly over the EU even in the event of a no deal.

A petition with over 14,000 signatures – calling for Gibraltar to have its own Westminster MP – has been delivered to the House of Commons and Downing Street.

On development, a 21-storey building at 92 Devils Tower Road has received full planning permission after the Government asked the developer to reduce the building height. Also the Ministry of Defence will further invest in facilities to accommodate the Royal Navy’s aircraft carriers at Gibraltar’s Naval Base. HMS Queen Elizabeth is currently berthed at the port but the MOD would like the option to berth HMS Prince of Wales – commissioned in 2020 – at the same time.

The sports betting and gaming group, GVC, is set to relocate its internet gambling servers to Ireland ahead of Brexit, but it will continue to headquarter its online businesses in Gibraltar. There is a legal and regulatory requirement for companies providing gambling to EU customers to be established and licensed in an EU member state. Some EU countries also require the servers hosting online gambling platforms to be located in a member state so the firm will operate under Maltese licences with servers located in Ireland. The change is not likely to have a significant impact on the headcount in Gibraltar. Likewise Lottoland – the lottery betting operator – has been awarded two gaming licences by the Malta Gaming Authority but the firm has no plans to move from Gibraltar.
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Channel Islands

Unemployment in the Channel Islands is low, sub c2% with c1100 islanders looking for work. At 2.9% and 5.2% the SW of England and Yorkshire & Humberside respectively had the lowest and highest unemployment rate in the UK. The UK unemployment rate stands at 3.9%.

Average earnings in the Channel Islands are c£700 per week. London had the highest average earnings of £846 whereas the North East had the lowest of £523. In the UK average earnings grew by 3.4% or by 1.5% after inflation. The Channel Islands’s average property price is c£480,000.

A proposed amendment to a UK bill on financial services – which would have obliged the Crown dependencies to create public beneficial ownership registers by 2020 – was dropped this month; in the UK information about who owns company assets can be accessed by anyone. Both the Jersey and Guernsey governments say that the amendment would produce inoperable legislation and it is unconstitutional. Also on financial transparency, legal reforms introduced last year have meant that Jersey and Guernsey have been recognised as cooperative jurisdictions; avoiding the EU’s tax blacklists. The EU’s list of non-cooperative jurisdictions has grown and now includes countries like Barbados and the United Arab Emirates. The crown dependencies are not in the UK nor members of the EU but benefit from tariff-free trade under the UK’s 1972 accession treaty which will cease to apply when the UK leaves.

The Fiscal Policy Panel – economists who advise Jersey’s government – warns £340m was taken out of reserves over recent years to balance the budget. Taxes will need to rise or public sector spending cut if Jersey’s government is to run a balanced budget. Recently the UK government’s auditors have reviewed Jersey’s social security fund, concluding that Jersey needs to start paying more in social security; currently employees contribute 6% of salary and employers 6.5%; far lower than the UK rate. Alternatively the population could be allowed to grow at a rate of at least 700 people a year. On demographics, people who were born and raised in Alderney – or who have lived in the islands for eight consecutive years – may apply to live in Guernsey to work or study. Workers could come from Nepal after immigration rules were relaxed to allow 130 non-EU migrants to work in the island on a seasonal basis. Jersey farmers are struggling to find staff to gather in its famous potato crop blaming Brexit for making the island less attractive to EU workers. Nepalese workers could come to the island for up to nine months at a time as part of a two-year work permit trial scheme using the UK’s connections with Nepal through the Ghurkas.

On transport, Blue Islands airline has criticised rival Aurigny after Aurigny announced flights from Guernsey to Jersey and Southampton. Blue Islands claims it loses money on these routes and there is likely to be insufficient demand for both operators; Aurigny is also likely to face competition itself from Flybe on its Guernsey to Manchester route. Aurigny – which is States owned – also said it was disappointed not to win a contract to operate Alderney’s flights between Guernsey and Southampton after Guernsey’s Economic Development Committee thought the airline had offered a reduced service and required too much of a subsidy.

A Sark hotel and a restaurant owned by the Barclay brothers are set to reopen – based on the island establishing a customs post – on the expectation that the island will attract more visitors directly from France.