This Is Guernsey

GUERNSEY could be in line for a windfall if the UK government carries through its pledge to get rid of tax loopholes for non-domiciled residents. Anatole Kaletsky, one of the UK’s leading economic commentators, said that while the future looked bright for Guernsey’s finance sector, the same might not be true for the City of London after the recent market turbulence.

‘The latest market events are not going to have as much impact on Guernsey as compared to much larger financial sectors.

‘What has happened since August is very serious for the City of London.

‘I think the City of London is really going to take the brunt of it and it’s going to be the British economy which is most exposed - even more than the US.’

He said the reason for this was because Britain was predominately dependent on the financial sector for its growth, and that the problems in the US housing market would affect it greatly.

‘Regardless of what happens in the US housing market in the next year or so there is a significant part of the wholesale capital market that resides in London, which has collapsed and will not be coming back for a few years anyway.’

Mr Kaletsky said Guernsey had a totally different set of specialities and, if anything, could capitalise on the situation in the UK particularly after the chancellor Alistair Darling’s pre budget announcement in October that the government would get rid of tax loopholes exploited by non-domiciled residents.

‘The Channel Islands I think will benefit from the sudden and imminent tax change.

‘People in the industry are saying it’s not going to lead to a wholesale flight of foreigners out of London, and although most will probably stay, there are those at the margin who will leave and even if it’s a small percentage, that percentage from the City would be massive for Guernsey.’

Mr Kaletsky was speaking ahead of his appearance at Ashburton’s 2007 ‘25:25 Vision’ conference.

He was joined at the conference by Gloom, Boom and Doom editor and publisher Dr Marc Faber.

Swiss-born Dr Faber, who is famous for advising his clients to get out of the stockmarket one week before the 1987 crash, however was a little more cautious about his predictions for Guernsey as an offshore jurisdiction and for the world’s economy in general.

He said the world economy was pushing itself to the limit at the moment to avoid a recession, and he was not at all positive for the future of the US economy in particular.

Dr Faber said attracting business to Guernsey from emerging markets such as China, Indonesia and the former Soviet States would be advantageous for the island, but he doubted how effective Guernsey would be at attracting it.

‘Guernsey has competition from many much larger tax destinations, and the climate here is not necessarily that attractive for someone from Asia.’

However, he said the recent announcement by Guernsey Finance that they were funding a permanent representative in China would help.

‘If Guernsey do that, then it will help. Because even the most affluent people in China won’t have heard of Guernsey, but will be much more likely to have heard of Switzerland and the Bahamas.’