SWFs have continued to invest in global banks located across the G8. The UK government’s involvement with Northern Rock in 2007, proved to be light touch compared with its more recent forays into the UK banking sector, where it has taken significant stakes in a number of household banking names, and unusually also supported consolidation of two leading players. 

Global stock markets have continued to demonstrate volatility, as they have followed a downward trajectory, and this is no more evident than in the financial sector. This volatility has been matched by the collapse in the price of commodities. Oil reached an all-time high of over $147 per barrel in early summer 2008, only to fall to around $30 a barrel today. 

Property prices are also on the way down in a number of leading economies, including UK, with no sign of a floor in the short term. 

It is likely that 13 of the world’s largest economies will be in recession any time soon, as the crisis which started in the financial world works its way throughout a range of industries and geographies. Talk of the de-coupling of emerging markets from the US and Europe has ceased, as the impact is seen to be truly global. 

In addition to these global economic trends we are also seeing significant changes to the political landscape and agendas. A new Democratic president in the US, (perhaps the most visible of the changes), faces challenges from many quarters. But increased levels of borrowing by governments across the G20 as they seek to mitigate the impact of recession have also raised the focus on tax revenues. 

And so, having described the maelstrom, what of Jersey? How is the island positioned to ride out the storm? 

Well, the statistics show: 

Bank deposits stand at £197 billion and fund balances at £239.9 billion. It is estimated that the States coffers are swollen by over £300m a year in tax receipts, either from the industry directly, or else personally from those employed within the industry. The industry employs 13,260 of Jersey's working population. Then there is the question of confidence. Business likes to have certainty around tax, legislative frameworks and economic environment. 

The States of Jersey have worked through a wide range of issues impacting on the business environment and have provided clarity on the GST and zero-ten tax changes. The worst-case fears relating to the budget changes regarding non-domiciliary taxation were also avoided as the UK government made significant amendments to its proposals.  

• The failure of a retail deposit-taking institution in each of the Isle of Man and Guernsey has caused much concern at client and institutional level, and has triggered a review of the status of depositor protection schemes in each centre. 
• Jersey has not suffered such a bank failure despite the market volatility. It can be argued that the policy of providing banking licences to only the top 500 and further only to those of systemic importance to their country of domicile, has proven effective. 
• Jersey has, rightly in my view, not made a knee-jerk reaction to the events, but is engaging in a period of consultancy to formalise a response which positions the island for these new challenges. This process is likely to conclude in Q1 2009, and provide the clarity sought by all. 
• Michael Foot’s offshore review instigated by the UK government potentially presents challenges for our island. However, this review will offer the island an opportunity to demonstrate the quality of our industry and to differentiate itself. I believe that with the States, Jersey Finance and industry heads working together, a robust case extolling the virtues of Jersey and its important contribution to the UK will be made. 
• Some business areas have been hit hard. Among others, securitisation volumes have been impacted. 
• Following a sustained period of heady growth, the housing market has slowed considerably. While this has a direct impact on the feel-good factor of many home-owners, it can be argued that a period of stability is desirable, and should not be of concern in itself. 
• Employment levels are still at near all-time high levels, but it is likely that we shall see some shrinkage in the number of those employed in the island, as businesses in all sectors focus on cost controls.

• The depth of quality of the professionals employed across Jersey’s finance industry, has seen the industry successfully navigate previous challenges, through a process of reinvention. The industry is far more diversified than ever before. Banking, wealth management, trusts, securitisations, private equity, fund administration, hedge funds and investment management have all expanded over recent years. Some areas have witnessed a slowdown in volumes, but others remain less effected – diversification is providing Jersey with a hedge.
• We have seen further extension of direct air links to/from Jersey. New airlines and routes are good news for finance, tourism and other associated industries.
• Uncertainty also provides new opportunities within certain segments. For instance proactive wealth managers will be actively supporting their clients through the current difficulties, reviewing risk appetite and providing new solutions tailored to meet changing needs.
• Jersey’s external reputation has taken major strides forward over the past decade. We are seen, (by most), as a well governed, regulated and managed jurisdiction and industry. As such there will be opportunities to benefit from the flight to quality, at jurisdictional level.

Of course, despite its island status, Jersey cannot be immune from the effects of the uncertainties in the global economy, particularly in the event that the current nervousness continues throughout 2009. 

It is imperative that we continually seek to improve our competitiveness as a jurisdiction to position ourselves to win in all economic environments. Thus we should seek to: 

a)    facilitate the recruitment of the best talent available to the industry. A key competitive advantage already for Jersey, we need to take tough decisions around immigration, but also the education and training of those who can help our industry stand out from our competitors,

b)    continually upgrade our technological infrastructure to encourage world-beating businesses to locate/remain in Jersey,

c)    improve the cost effectiveness of carrying out business in Jersey.  Keeping a lid on inflation and associated pay-round expectations is critical to the business community. Jersey can remain a highly successful and attractive location for the finance industry. However, we are living in times of great uncertainty, where many previously held convictions are being held up to scrutiny. It is essential that the wider business community and government continue to work together.