Jersey’s FUTURE W
e asked Marcus Stone (MS), a founding partner of Hatstone
By MARCUS STONE, Founding Partner, Hatstone Lawyers
Lawyers and Michael Shenkin (A), an associate at Hatstone Lawyers the questions: “Do you believe Jersey's finance sector will grow significantly in the next three to five years, and if not, why not?”
MS: The Jersey finance sector has experienced a very difficult few years after a period of huge growth. In particular, various areas are struggling such as fund services business and the traditional trust company business model. Due to its importance to Jersey, this is bad news for all business sectors – even for those that dislike the finance sector.
By MICHAEL SHENKIN, Associate, Hatstone Lawyers
A: It is true that regulatory and compliance issues are increasing the cost of doing business in Jersey. However, the economy is growing and Jersey strength over the years has been its ability to adapt quickly to a changing global environment. There is no reason to think that this will not continue to be the case.
MS: Unfortunately, this will not replace all the business that is being lost. We are witnessing a significant growth in our employment practice with senior people leaving trust company businesses and not finding alternative work.
A: There has been a lot of consolidation in the trust company sector driven by regulation and an influx of private equity backers. The larger law firms have also consolidated with their global partnership models. Whether this is positive or not, it is a cultural change that is here to stay.
DEPENDS ON ITS ADAPTABILITY
MS: I thought the recent economic crisis would only last twelve months. Unfortunately, I now believe that the economic crisis will last until at least 2016. As for Jersey, I am of the view that the finance sector will continue to contract. There is no commercial justification for it to grow.
What are your views ?
A: I think we are through the worst of it. You have only got to get on the planes to Gatwick, which are busy, to see the difference between now and the dark days of 2009. The noughties were a decade of excess. Wage and revenue expectations got out of hand. Hopefully things will rationalize into a period of steady growth.
MS:We are now witnessing new businesses coming into the island but not generating the amount of income for the island as the traditional trust company business model did. There is new business but everyone wants something for nothing. There have been the examples of where one of the top four law firms has offered to work for nothing to win a headline transaction. Profitability is down at most businesses across the island.
A: However, there are a lot of businesses, which have adapted to the crisis by streamlining and
focusing on the core of what they do well. I have heard of rising EBITDA across several industries so I am not sure it is that bleak; but the level of regulation for funds is making things difficult in that sector so far as inbound business is concerned.
MS: Yes, unfortunately. You only have to visit the JFSC’s website to see the number of regulated funds that have been set up in the island. The numbers of such products are frighteningly low.
We (as an industry) are now paying the price for the rubbish that we set up more than a decade ago. Names such as Belgravia immediately come to mind. Good business is now being turned down.
Unfortunately we are now advising clients that expert funds take at least up to eight weeks to set up whilst the JFSC’s website suggests an ambitious turnaround time of 72 hours.
A: Apart from the funds sector and the traditional trust company business, what about the other finance sectors.
MS: The number of banks in Jersey has diminished. As you know, the JFSC operates a very tight banking entry level including but not limited to a top 500 bank
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20/20 Finance & Investment
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