Comment: how do we get more productive?

Tuesday 03 October 2017

The most recent figures for Jersey's economy showed some growth - but allied to an alarming drop in productivity, which has been something successive Councils of Ministers have tried to address. Here, well-known businessman, Kevin Keen, gives his personal view on the the island's most recent economic health stats.

"This week saw the publication of GVA and GDP figures for 2016; the half glass full response was our economy grew by 1% the third year of growth. The half glass empty view was that growth was half of the 2015 rate and also just under half what was achieved in the UK for the same period.

"Again, depending on your point of view there is both good news and bad news when you look at the make up of the results.  Our largest sector and source of the vast majority of our export earnings declined for the third year in succession and in real terms is now 34% smaller than it was at the beginning of this century.

"On the positive side another export sector, and one close to my heart, tourism (or its proxy, hotels, restaurants and bars) grew for the 7^th year in a row, although on this basis it is still only 4% of our economy, compared to the 50% it was in the sixties. How things can change.  Some might be pleased our dependence on financial services is reduced and now only represents 41% of total GVA rather than the 56% it did in 2000, but I am not one of them, because we have achieved diversity by shrinking our economy in real terms.  I am no economist, but the other very important thing is the there are large second round benefits for every sector driven by financial services.

"Fortunately, and like tourism 50 years ago, the annual decline in financial services is gradual and so far has not really impacted on employment too much. Also and very importantly this time our Government is supporting the sector to promote itself and find ways to diversify. Belatedly, but thankfully, Government is also supporting more general attempts to diversify our economy like a recovery in tourism, and of course trying to develop a digital sector. Well, most of the time anyway.

"Although our GVA per head of population is still well ahead of the UK (and many other places!) it reduced slightly in 2016 and according to the Statistics unit, it has declined by 24% since the beginning of the century, largely explained by the decline in financial services but also because of the growth and no doubt ageing of our population. Clearly this is a worry but maybe not a surprise given all the challenges our biggest sector faces. More automation can improve productivity but with a tax system very dependent on taxes from employment rather than corporate profits it will produce some different challenges for the Island.

"In my view, absolutely key to increased productivity, and finding our next big thing for Jersey, will be having the best-educated workforce we can possibly achieve. This is something a rich island like Jersey should aspire to, not just better than the UK, but better than anywhere. Lets think big, really big.  As Malcolm X said, 'Education is the passport to the future, for tomorrow belongs to those who prepare for it today.'"

The views expressed in this article are those of Mr Keen personally, not necessarily of any company he is involved with.