Productivity falls further in Finance

Wednesday 04 July 2018

Nearly £900million is now being spent on island finance worker wages each year, but the island’s most valuable industry is the least productive it has been in 20 years.

Overall expenditure on finance sector employment has tripled from £300million in the past two decades, with the average full-time finance worker’s salary sat around £70,000 in 2017 – an increase of 9% on the previous year alone.

But despite more money being ploughed into employment within the £1.7billion sector, productivity plummeted to its lowest levels ever recorded, continuing a drastic 20-year downward trend.

Measured by the economic output per employee, productivity is one of the main drivers of living standards in Jersey. It also defines how heavily the island relies on non-local workers.

Pictured: The total Gross Value Added (GVA) to the Jersey economy of the finance and legal sectors was £1.74bn in 2017. (Statistics Jersey)

Between 2016 and 2016, it fell by 3% across the entire finance industry, with the sub-sectors of banking, fund management, trust and company administration, and legal all experiencing a fall.

Accountancy was the only area not to decline last year. Despite workers taking home the lowest average wage and bonus (£53,000 and £1,600), accountants’ productivity levels shot up by 3%.

Fund managers took the largest average salaries and bonuses (£91,000 and £16,800), followed by bankers (£76,000 and £8,700), trust and company administration employees (£67,000 and £5,600), and then legal workers (£64,000 and £3,800). 

Pictured: Productivity fell by 3% from 2016 to 2017, continuing a long-term downward trend. (Statistics Jersey)

The overall productivity fall was coupled with a decrease in the economic output of the finance sector, largely dragged down by banking struggles. It meant that the gross value added to Jersey’s economy (GVA) by the Finance and legal sector was £700million lower than a decade ago.

Banking reported a 5% decline in its overall value to the economy between 2016 and 2017, which was largely attributable to smaller banking businesses employing fewer than 100 full-time staff. Larger entities experienced little change, however.

The figures came in a report released by Statistics Jersey today, which also showed that fewer local staff were being recruited directly from school and university. 250 education-leavers were employed as full-time finance and legal staff in 2017 – a decrease of more than a third since levels reached a high of 390 in 2014.

We have just published the 2017 Finance and legal sector GVA and productivity report. You can read the report here: https://t.co/vFuDIeKs29 pic.twitter.com/ze3EpKwPT0

— Statistics Jersey (@JsyStats) July 4, 2018

The news is unlikely to be a shock for Ministers old and new, who have previously targeted plummeting productivity as a priority. 

In last week’s States Assembly meeting, new Chief Minister John Le Fondré said that “insufficient attention had been paid to productivity” under the previous administration.

Speaking about challenges for the finance sector, he commented: “As we know, there is this massive trade-off between the regulatory standing of, for example, our finance industry and how that is seen from the outside world, and what therefore is practical. However, what is clear is that productivity, or some of the areas around productivity, include greater focus which means greater cost coming out of things like risk management, assurance, part of it has been provisioning and writing off bad debts, and obviously the fall in bank interest has all had an impact on how productivity is reported within financial services.”

Nonetheless, Senator Le Fondré promised that productivity would be an “important element in the common strategic policy that will be developed in the autumn.”