Economic trends

Introduction

This Brief provides a summary of the key data on trends in the Jersey economy, in particular the major variables – economic growth, retail prices and earnings.  It also summarises the analysis from the Government’s Fiscal Policy Panel (FPP), which includes forecasts for the next three years.

Summary

• Financial and insurance services account for 40.4% of Jersey’s economy.
• Jersey’s economy grew by 7.3% in 2023. The FPP forecast is for growth of 2.1% in 2024 and 0.6% in 2025.
• Retail Prices increased by 5.0% in the year to June 2024. The FPP’s May 2024 forecast is for an increase of 3.5% in 2024 and 1.7% in 2025.
• Average earnings increased by 6.4% in the year to June 2024. The FPP’s May 2024 forecast is for an increase of 7.7% in 2023 as a whole, and 5.2% in 2024.
• The FPP’s May 2024 forecast for house prices is no change in 2024 and increases of 2% in 2025 and 2026.

Structure of the economy

The annual report Measuring Jersey’s economy – GDP and GVA – 2023 was published on 4 October 2024. Table 1 shows a breakdown of Gross Value Added (GVA) by sector in 2023.

Table 1 Gross value added by sector, 2023

The breakdown is presented using the revised 2007 Standard Industrial Classification. The report notes that whilst most of these sectors are self-explanatory the following are worthy of particular comment –

• Financial and insurance activities includes a number of sub-sectors such as banking, trust and company administration as well as other financial service providers. It does not include legal and accounting services which have been traditionally included within the Jersey “Financial Services” GVA figures. These sub-sectors are now included under the “professional, scientific and technical activities” sector making international comparisons easier.
• Real estate activities includes rental income of private households which was previously presented separately. This includes both rental income earned by private households as well as owner-occupied imputed rental costs (a notional figure of the rent that would be payable on owner-occupied properties) , which represents 68% of the GVA in this sector.
• Public administration includes the Government of Jersey, non-ministerial departments and the twelve Parishes. It does not include trading entities such as the Ports of Jersey or Jersey Car Parks, which are classified under transport and storage).
• Professional, scientific and technical activities includes (as mentioned above) the activities of legal and accounting services.
• Other sectors includes all other sectors of the economy (this includes industries such as agriculture, transport and storage as well as manufacturing.

The key statistics on Gross Domestic Product (GDP) are –

• GDP increased by 7.3% in real terms compared with 2022.
• GDP was £6,575 million.
• GDP per head of population increased in real terms by 7.0% compared with 2022.
• GDP per head of population was £63,500.
• The increases in both GDP and GDP per head of population were above the previous 10-year average.

A sectoral breakdown of Gross Value Added (GVA) shows –

• The annual increase in overall GDP was driven by the financial and insurance activities sector, particularly as a result of increased net interest income in the monetary intermediation (banking) sub-sector.
• The largest percentage increase in GVA was observed in the financial and insurance activities sector which increased in real terms by 19.4% in 2023.
• Excluding the financial and insurance activities sector, the GVA for the rest of the economy increased in real terms by 0.4%.

Labour productivity, measured as GVA per full-time equivalent worker, increased by 8.8% in real terms in 2023. This annual increase was again driven by increased profits in the financial and insurance activities sectorwhich recorded a real-term increase in productivity of 19.8%.

Economic growth

The report gives links to detailed statistical tables, which enable the longer run performance of the economy to be analysed. The economy grew rapidly in the late 1990s and then was fairly stagnant until 2007. By 2013 the economy had shrunk by 15% and, given the increase in population, GVA per head had fallen by over 20%. There was then a steady recovery until 2020 when the pandemic caused a 10% reduction in the size of the economy. This was reversed in 2021 and strong growth of 6.2% was recorded in 2022. It was only in 2022 that GVA in real terms exceeded the 2000 figure. However, given the increase in population real GVA per head was 9% lower than in 2000. The strong growth continued in 2023.

Table 2 summarises these trends. The figures are taken from tables that can be accessed from the 2023 report.

Table 2 Growth of the Jersey economy 2012-2023

Retail prices and earnings

Statistics Jersey publishes quarterly retail price reports.

On 24 July 2024 Statistics Jersey published Jersey Retail Prices Index June 2024. The key points are –

• In the 12 months to June 2024 the All-Items Retail Prices Index (RPI) for Jersey increased by 5.0%, a reduction from the figure of 5.7% in the 12 months to March 2024 and 10.9% in the 12 months to June 2023.
• Housing made the largest contribution to the inflation rate, contributing 1.8 percentage points, largely as a result of increases in the cost of mortgage interest payments.
• The underlying rate of inflation (RPI (Y)) increased by 3.9% in the twelve months to June 2024, compared with 3.7% in the 12 months to March 2024. This measure excludes mortgage interest payments and indirect taxes and is the best measure of the trend.
• Three separate indices cover specific categories of people. So, compared with the all-items increase of 5.0% in the 12 months to June 2024 -

o RPI (X), which excludes mortgage interest payments increased by 4.1%.

o RPI Pensioners increased by 4.4%.

o RPI Low Income increased by 4.0%.

• The rate of inflation in Jersey over the twelve months to June 2024, as measured by the all-items RPI, was 2.2 percentage points higher than the equivalent UK rate – 5.0% as against 2.8%.

The following graph is reproduced from the report.

Figures on average earnings are published for June each year. Index of average earnings June 2024 was published on 22 August 2024.

The summary is set out below –

In June 2024:

• average earnings per full-time equivalent employee (FTE) were 6.4% higher than in June 2023
• after adjusting for inflation (the headline rate of inflation in Jersey in June 2024 was 5.0%), average earnings increased in real terms by 1.3%
• over the last 10 years, average earnings have decreased in real terms by 2.4%
• over the last 12 months:
  • average earnings in the private sector increased by 5.9% in nominal terms (before adjusting for inflation) and in real terms increased by 0.9%
  • average earnings in the public sector increased by 8.8% in nominal terms and in real terms increased by 3.6%
• on a sectoral basis:
  • the agriculture and fishing sector was the only sector to record a decrease in average earnings (decreased 2.7% on an annual basis); this was driven by average working hours in the sector reducing by a greater proportion than the increase in the minimum wage (10.9%)
  • the public sector saw the highest annual increase, up 8.8% on an annual basis; this was driven by an 8.0% headline pay award in the public sector as well as nurses and teachers receiving delayed pay awards from 2023
• median average earnings of full-time equivalent employees was £850 per week
• mean average earnings of full-time equivalent employees was £1,000 per week

Fiscal Policy Panel analysis and forecast

Statistics Jersey publishes statistics. Analysis of the statistics and forecasts for the future are made by Jersey’s Fiscal Policy Panel, a group of economists who provide the Government with independent advice on trends in the economy and the economic outlook. The Panel published its 2024 Annual Report on 24 September 2024. Its analysis of economic developments made the following points –

• The outlook for global growth in the near term remains stable but below pre-pandemic levels. Global inflation has fallen considerably from its 2022 peak, but remains above target in many economies and the risk of persistent inflation remains amongst a background of escalating geopolitical tensions and increased uncertainty.
• Jersey’s economy is likely to have benefited from strong economic growth in 2023. As in 2022 this growth is likely to have been driven by strong profit growth in banking, well above the historical average. By contrast, economic growth in the rest of the economy is likely to have been weak. With banking profits forecast to grow at a much slower rate from 2024, the outlook for economic growth is comparatively weaker.
• The introduction of the OECD Pillar Two framework will mean a change in the tax regime. This will directly affect Jersey’s financial sector and, by extension, the island’s economy. All else equal, tax receipts are expected to increase in the short-term but the change inevitably creates some uncertainty about the future.
• Jersey’s economy typically operates at full employment, relying on migrant and seasonal workers to fill new and additional jobs. The number of jobs filled rose by 1.1% in 2023, whilst the number of people registered as actively seeking work (a measure of unemployment) remains low (below 700 people). Further, there are indications that the labour market may not be operating as flexibly as it might.
• Headline inflation has fallen over the last year to 5%. It is forecast to fall further as interest rates are expected to be reduced. However, the recent uptick in underlying inflation could be indicative of domestically generated inflationary pressures.
• Housing market activity has slowed. Turnover fell by 43% and prices fell by 3% in 2023. The fall in house prices has been more than offset by higher mortgage costs, as such housing affordability has not materially changed. The high cost of housing continues to be a potential drag on productivity.
• Real earnings grew in 2024. However, between 2020 and 2024 real earnings decreased by 3.3%. The fall in real earnings is largely because inflation has been high, but also reflects low productivity. Looking ahead, productivity will need to increase so the economy can support an ageing population without a reduction in living standards.

The Panel publishes each Spring a report on economic trends which includes a table of “central economic assumptions”, broadly speaking an economic forecast. The 2024 report updated economic assumptions was published on 3 May 2024. Table 3 shows the key variables, taken from the report.

‍

Table 3 Key economic variables, rate of change %

.

Publications schedule for 2024

The Business and Economy Statistics page of the government website contains details of 11 relevant statistical series.  Key dates for the remainder of 2024 are - 

4 October 2024:    2023 GVA and GDP

23 October 2024:  September2024 retail prices index

‍