Setting up a new business in Guernsey is too difficult and expensive, according to some of the island’s business leaders and innovation experts.

Innovate Guernsey (IG) board member Susan Watson said there was too much “friction” and too many “barriers” for early-stage entrepreneurs.

The top obstacles included the cost of starting a limited company, compliance requirements for non-regulated firms, and tech products like Stripe being unavailable in Guernsey, according to an IG survey of local business people and investors.

Ms Watson said the organisation’s next step was to “prioritise” the barriers and work out “fixes”, as it only had “limited resources”.

A group of seven people - four women and three men - stand in a paved courtyard surrounded by historic stone buildings. They are dressed in casual and smart‑casual clothing, with benches and greenery visible in the background on a sunny day.
Pictured: Susan Watson (second from left) was a founder member of the Innovate Guernsey board.

Less conversation, more action

She said it was important for the States, Guernsey Registry and the Guernsey Financial Services Commission (GFSC) to work together with industry to reduce red tape and speed up decision making.

“We want to focus more on doing – on moving quickly – than talking for hours and hours,” Ms Watson added.

Scope for improvement

Deputy Sasha Kazantseva-Miller, President of Economic Development, told Express there was “scope for improving the process for incorporating non-regulated businesses”, especially for company directors who lived and traded locally.

“This is something that we have been discussing with Guernsey Registry and also as part of the concept of a local personal and business Digital ID,” she added.

She said Innovate Guernsey had been set up to “accelerate work on this space, unlock more private investment, a better innovation culture and funding that’s required to support ideas and startups”.

Deputy Kazantseva-Miller said Guernsey could become a “test-bed for solutions that can be exported elsewhere”.

Entrepreneurial spirit

However, she said it was important the Bailiwick continued to demonstrate “high standards” as an international finance centre, while still making things “proportionate” for locally-trading firms.

Deputy Kazantseva-Miller said one of the reasons payment platforms, like Stripe, did not support Guernsey was that the registry’s computer systems needed to be able to exchange basic company information, like name, address and incorporation numbers with them.

Deputy Kazantseva-Miller said: “New ideas through startups or internal company innovation continue to be crucial to ensure our economy and businesses don’t fall behind other jurisdictions.”

“Guernsey has a history of innovation cycles and a strong entrepreneurial spirit, which I don’t believe has fallen away.”

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Pictured: Jay Goss said Guernsey’s regulator was more agile than those of other jurisdictions. (Bank Aston)

One person trying to remove barriers around business banking is Jay Goss, who co-founded Bank Aston last year – Guernsey’s first new bank in 30 years.

Mr Goss has been doing business in Guernsey for over a decade, but it was agility of the island’s regulator – the GFSC – which was the reason for headquartering the new bank here.

Guernsey’s regulator was far more “open, willing and able to have a conversation” than other jurisdictions, he explained.

Despite being out of practice at regulating banks, GFSC “got us regulated in five months” compared to “probably 19 months to get a ‘no’ in the UK”, a “huge, huge difference”.

‘Bonkers’

Having all the senior decision makers in the Bailiwick allowed Bank Aston to make “pragmatic and fast” decisions based on local knowledge, he said, rather than algorithms or far-off decision makers.

“When South Africa went on the Grey List, some of the banks here closed all their South African-passported accounts, even though these might have been clients for 20 or 30 years, which is bonkers.”

When it came to financial services, Guernsey was “open and willing and proactive – people want to get things done”, he said, a mindset he sees as one of the island’s key strengths – and one that could be applied more widely.

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Hansen Canagareddy said non-regulated companies setting up in Guernsey often had to pay more than 200 times as much as in the UK.

However, finance entrepreneur Hansen Canagareddy thinks Guernsey’s strength in finance may be hindering things for other sectors.

He said the States, GFSC and Guernsey Registry were under pressure to maintain the bailiwick’s international reputation and keep the island “whitelisted”.

While this was something for the island to be “proud” of, it also meant much more stringent background checks for anyone starting a non-regulated company, compared to the UK.

200 times UK cost

Mr Canagareddy explained that business owners were forced to pay upwards of £3,500 to set up a limited company in Guernsey, because they needed to go through a Corporate Service Provider (CSP).

By contrast, non-regulated firms in the UK can register directly with Companies House or through company formation websites, with setup costs as low as £15 – less than 0.5% of the Guernsey cost.

One small business he knew of was “red-flagged” when the owner tried to set up the company, because they didn’t use a company director provided by the CSP or have offices, Mr Canagareddy said.

“The owner is going to put his registered address as his home, he doesn’t need an office.”

Ability to experiment

Venture capital investor Marc Cohen agreed the island’s high startup costs – along with annual registration fees and the effective need for a qualified accountant – were a “huge barrier for innovation”.

In the UK, dormant companies and very small firms – with fewer than 10 employees or a turnover under £1 million – can file simplified micro-accounts, which do not need to be completed by a certified accountant – a significant cost saving.

Mr Cohen said it was important for people to be able to “run cheap experiments” to find out whether their business ideas had potential.

“You don’t always know what’s going to work and what isn’t – what’s going to blow up and become the next big thing.”

“The bigger that barrier to entry is, the more it discourages people from trying”, Mr Cohen added.

A woman in a light brown jumper over a white blouse sitting at a desk typing on a laptop, with documents, charts, sticky notes, a calculator, and stacked folders spread out across the workspace. Sunlight streams in through large windows behind the desk
Very small firms in the UK – known as micro-entities – can file simplified accounts, meaning they don’t need to hire an accountant.

‘Make it cheap’

While many early-stage firms would inevitably fail, some could turn into successful business employing “50 or 100 people”, Mr Cohen said, or even turn into an “outlier” like Specsavers.

One possible solution would be to give non-finance businesses meeting certain criteria a payment holiday on registry fees for the first few years they were trading, as well as reducing end-of-year costs.

“Give them a couple of years to get there – that’s the easiest way to do it,” Mr Cohen said, “If you still can’t afford it after a couple of years you haven’t got a viable business.”

Dynamic economy

It was still important for Guernsey’s international reputation to remain “whiter than white”, Mr Cohen said.

However, “within that constraint, you still want to make it as easy as possible to get started”.

Rather than politicians and civil servants predicting which sectors would do well in future, it was important for Guernsey to have a “dynamic economy”, Mr Cohen said, so that it could organically “evolve” over time.