A DOWNTURN in the British economy would have limited impact locally, according to one financial expert. Bank of England Governor Mervyn King, pictured, has warned of rising inflation and reduced growth in the UK economy.
He predicted that borrowing for individuals would get harder with the credit crunch that would initially hit the housing and commercial property markets.
Asset manager Dawnay Day Milroy director Paul Meader did not expect the island to suffer greatly as a result.
‘Guernsey may well see some slackening in the breakneck pace of new business but it is unlikely to see a significant economic downturn,’ he said.
‘It is far too early to suggest that any of the zero-10 objectives are in jeopardy as a result and I would doubt there will be problems.’
It highlighted, however, that Guernsey as a community was highly dependent upon global events outside its control and on international business flows.
‘It shows how important it is that we make the right policy decisions locally to remain attractive to international financial services business,’ said Mr Meader.
‘Imagine what it would be like to face a potential economic slowdown, while at the same time failing to be competitive internationally. That would make the current debate about health care and other budgets look insignificant.’
He said lenders were becoming more selective and looking for higher returns as a result of the problems in the credit markets.
Unless that blew over quickly, it would impact on the UK and, inevitably, Guernsey too. If it did not blow over quickly, the problems could reverberate for some time.
Against that, global economic growth remained strong and financial services activity buoyant.
Treasury minister Lyndon Trott said it was looking likely that there would be a substantial reduction in growth in the US economy as a result of the sub-prime mortgage crisis and consequent credit crunch.
‘In effect, when the US economy stutters, Europe usually follows. European growth therefore will be less than previously anticipated.’
‘Guernsey finds itself in the advantageous position of introducing a benign corporate tax regime at precisely the right macro-economic time.’ he said. ‘There’s an element of luck inscribed in this, but it further emphasises how damaging any delay in the agreed strategy would have been.’
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