GUERNSEY was experiencing the effects of a two-tier economy at the start of this year, according to Treasury minister Charles Parkinson (pictured).
In the first of the department’s quarterly bulletins, he reveals that there seemed to be a growing divergence between the fortunes of the financial services sector and the island’s domestic economy.
He compared the slowdown in the housing market and the knock-on effect that that has had on the sales of household equipment and other ‘big-ticket’ items, such as cars.
However, the fund management industry saw £26bn. of new business in the first quarter of the year, which took the total of funds under administration in Guernsey past the £200bn mark.
Deputy Parkinson believes the island may now be out of that particular two-speed situation for the time being.
‘We were not sure how long-lasting that would be because it looked quite severe in January and February.
‘But there seems to have been a recovery in March and April.
‘Both property transactions and car sales picked up in March.
‘A lot of it is to do with consumer confidence and the amount of credit available.’
For example, new car registrations, which fell 42% in January and February, almost doubled in March.
‘I don’t think we [the States] can do any more to keep the economy strong, but there is an economic cycle.
‘We have had things good in Guernsey for so long that people forget these things come and go and that we are in a bit of a trough.’
Deputy Parkinson said inflation would continue to be a threat to economic stability but it was the same for countries all around the world.
‘The principal causes of the upsurge in inflation have been higher food and energy prices.
‘Oil prices in world markets reached $135 a barrel on 22 May, but some observers believe that the oil market is showing all the classic signs of a “bubble”.’
The Treasury and Resources quarterly bulletin is produced at minimal cost and distributed to all States members and the local media.
However, it is also available to islanders on request from Sir Charles Frossard House, St Peter Port.
‘It’s a new venture,’ said Deputy Parkinson about the publication.
‘We don’t know how much interest there will be in it.’
Article posted on 7th June, 2008 - 9.29am
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One Article Comment
I’m not sure how having £200bn + of funds under administration can be a pointer to a convergence of the two tiers of our economy. Surely the fact that Finance is doing so well will mean those not involved in Finance are more likely to be left behind. With more wealth concentrating to fewer people, whose ‘big ticket’ purchases are essential to maintain the appearance of a booming economy, the markets will be further distorted, and the gap between rich and poor will be exacerbated.
At least someone in charge has admitted what has been happening for several years now. How are current policies going to reverse this trend, and get everyone on Island to enjoy the benefits from our premier industry? After all, that is what Government is for.