The response of Jersey’s and Guernsey’s governments to business needs resulting from Covid-19 far exceeded any previous requirements placed on them. So how can businesses and authorities team up to preserve reputation and build market share?
The word ‘unprecedented’ has become the standout phrase in relation to the impact of Covid-19 on business and the global economy – practically the tagline of this horrific and tragic crisis.
The reason is that, while previous recessions and economic downturns, such as the 2008 credit crisis, dealt a blow to businesses, the level of destruction to the world’s finances caused by coronavirus has been unimaginable.
To begin, coronavirus was, of course, a medical crisis – and huge loss of life is horrific. But the lockdown and social distancing measures put in place in response to the virus quickly also led to economic collapse.
Businesses have struggled to operate without people meeting face to face, without interacting with their clients and customers in the usual ways, and without off-island travel to win new business.
It’s no surprise, then, that governments around the world have had to be resourceful and creative like never before in finding ways to support business through the initial impact of the pandemic – and in devising a plan for rebuilding, recovery, growth and innovation. The Channel Islands are no different.
Heightened engagement
Early indications suggested that help to the tune of £500m would be needed to support employers in each of the Channel Islands – a package of measures to help them navigate lockdown and to stimulate new economic growth.
Most of the islands’ businesses are trading companies employing fewer than 20 people – and simply did not have the reserves required to see them through restricted working or complete shutdown.
In healthier times, there has been relatively little interaction between the governments and the business community in the islands. But this quickly shifted to a high level of engagement as government sought clarification on where the most pain was being felt by employers, while businesses sought to ensure that the right kind of support packages were put in place for them.
Adam Budworth, Managing Director of Grant Thornton in the Channel islands, recognises something of a sea change.
“This is new. There’s an understanding that business and stakeholders can play an important part in the recovery. It has brought the two sides together,” he says.
“What’s recovery going to look like and how do we bring private and public sectors together to do that? There’s a place going forward for more dialogue and more engagement and collaboration.
“You’re not going to satisfy everybody. But by taking other views on board you get to a quicker and earlier decision than you do by writing a policy and finding it doesn’t work.”
A change of conversation
Budworth’s view is echoed by Tom Carey, Partner at Carey Olsen. “It’s a different dialogue,” he says. “In good times, businesses would rather government left them alone. It will be a different conversation over the next few years: fine, you can have the money or raise the money, but how are you going to allocate that resource? How can we help?
“Crisis situations give rise both to entrepreneurial flair and crisis management, and civil servants like having non-public sector experts around the table to provide a third-party view on life. There’s an added value they find highly beneficial.”
He says the islands’ authorities have been much more engaged with business experts during the crisis and more willing to listen to views and advice, and the results have been positive.
For example, a government-underwritten loan guarantee scheme operated by banks to provide businesses with cashflow and liquidity was established collaboratively within two weeks – ordinarily, it might have taken months.
Graeme Smith, Chief Executive Officer of Jersey Business, recognises the value of government working through the medium of representative business bodies to ensure good communication and understanding, so that the support schemes rolled out are effective and understood.
“Any one of those schemes would probably have taken 12 months in times gone by,” he tells BL. “Government has had to be agile and deal with complex areas as to how schemes are delivered. There has been incredibly good communication.
“We understand how business thinks and we are seen by both parties as being independent. We have felt government has really opened up to us, so we have been able to help influence their thinking – one case being the reduction of exclusions to payroll schemes.”
As the governments in both islands work on recovery plans for the economy and individual sectors, it’s clear that there will need to be significant investment in infrastructure and systems – including marketing, advice and consultancy.
These are key areas where attention will need to be focused, in the view of Deputy Charles Parkinson, President of Guernsey’s Committee for Economic Development. “We need to think about overcoming the obstacles to doing business – planning, the population management regime, any liberalisation steps we can take to free up the economy,” he says.
Parkinson is quick to point out that business and government were certainly talking before the pandemic and that, in fact, the relationship was quite close.
But there was always a recognition that any effective partnership with the private sector depended on the sector’s input of ideas, energy and resources. “The crisis is forcing us to address some of the issues we should have been addressing anyway, which suddenly come to the forefront when you are talking about survival.
“For example, we need to have a good look at the telecoms strategy. It’s been subject to the ultimate stress test to support business, remote learning and social interactions,” he says.
The Channel Islands have accumulated capital from investment growth in recent years, both Jersey and Guernsey have good credit ratings – and thoughts are now turning to borrowing.
However, some believe there was a false perception that the governments of both islands had access to ‘bottomless pits’ of financial reserves to be deployed in such a situation as Covid-19.
Repaying the debt
The reality is that part of the recovery plan depends on the support given being repaid in the future – perhaps funded by raising taxes or by stimulating the economy.
Guernsey’s Deputy Lyndon Trott, who led on the support packages for the Policy and Resources Committee, says he has been surprised by how little understanding of public finance the average citizen has.
“People have been saying we’ve got billions, with pension schemes, the contingency reserve, capital reserve and so on,” he says. “But despite the fact we have hundreds of millions of reserves, which sets the Channel Islands aside from almost every other community, the amount we have is significantly less than people believe.”
Trott maintains that the States’ prime motivation was to encourage businesses to keep people in employment. But any measures put in place must be balanced against the requirements of the taxpayer.
“We certainly need business to keep on talking to us and telling us where they feel pain and stress, and where they need support,” he adds. “There’s only so much government can do – particularly in a political environment where there’s a reluctance to borrow. It’s about having some dry powder left post-crisis.”
Time to talk
The size and scale of the Channel Islands also meant that politicians and business people were easily accessible during the crisis – and discussions on Brexit had been a good rehearsal, paving the way for consultation over the current crisis.
“We’re far more hands-on than any of us want to be as the custodians of taxpayer funds,” says Trott. “None of us in government have any amount of exclusivity on wisdom and we have asked for ideas on how we can get the maximum multiplier for the recovery stage.
“There’s a fertile environment for ideas and suggestions being fed in. We are not ‘all in this together’ right now, but in recovery we will be. There’s definitely going to be more opportunity for shared risk and reward.”
Trott believes this is the time to be outward looking and to talk to the world about what the islands do and how they do it. His mantra is to hope for the best and continue to plan for the worst.
Business will have a huge role to play in the rebuild and restructure of the economy. And the islands – historically conservative with a ‘small c’ and now out of their comfort zone – should be able to move quicker and with more agility.
Carey is looking to government to preserve the stability that is at the heart of the Channel Islands’ sales pitch. “The government’s part is to create a stable, well-governed environment that is supportive of employment and employers in the economic crisis and to engage on the world stage as a sensible member of the global economy.
“The crisis will only be solved by global interaction. With sensible law-making and economic policy, we can work hand in hand.
“Although people are hamstrung by the inability to go out and market the jurisdiction face to face, when they do, economic and political stability is a great thing to be able to sell,” he adds.
Parkinson has great faith in the experience and expertise of the Channel Islands’ business communities, too. “If they are given the opportunity to get back to work, businesses will sort out most of the problems themselves.”