Guernsey looks beyond London for future prosperity

Guernsey saw 21 major relocations to the island during 2016, with a broadening target market including fund managers, reinsurers, digital operators and fintech firms, according to Richard Le Toq, head of Locate Guernsey. The new arrivals made an initial contribution to the economy of £700,000 ($872,000) during the year.

“Fund managers are definitely a target for us,” says Mr Le Toq, especially since the advent of the OECD’s 2014 strategy to combat Beps [base erosion and profit sharing] tax avoidance schemes. Guidelines now require “real substance and value creation of our businesses,” he says.

He also sees an “immediate window of opportunity” during Brexit negotiations for UK businesses reconsidering where to base assets and operations. The initial sense of shock on the island in the days following the UK referendum has given way to realisation that opportunity is there for the taking, says Natasha Kapp, Guernsey-based partner in Carey Olsen’s private wealth and trusts practice.

“There will be challenges posed by Brexit as nobody likes uncertainty. But there will also be opportunities on the funds side,” she says. “We can be a conduit on an interim basis. People can’t just sit and do nothing for two years. The funds industry needs to be very pro-active and seize these opportunities.”

But there is much less concern here about the damage which Brexit can do to the island economy than on neighbouring Jersey, where funds business appears more closely linked to London’s fortunes. 

Guernsey has already proved a particularly good home for private equity funds and has become more innovative in this sector. But it has also introduced various specialist trusts and cell companies, which can provide tight protection of assets.

Guernsey may be smaller physically than rival jurisdictions such as Cayman and the BVI, but “the range of its product offering is better thought out than other offshore jurisdictions,” says Andrew Walters, a director of Trust Corporation in St Peter Port, Guernsey’s capital. Companies there are now “tax compliant” and regulated. 

“Unlike other jurisdictions, there are no companies operating in the shadows,” with the brass plate Caribbean-style industry now totally absent from Guernsey, he says.

Much recent success has come from diversifying its catchment area away from London and embracing Middle Eastern business, says Mr Walters, with Guernsey-based family offices now looking after the needs of “several large, dynastic” Middle Eastern families, particularly for succession planning. This has happened despite the rise of rival centres in the Arab Gulf. 

“Although the City of London is still an important source of business for us, we now have a well diversified client base around the world,” confirms Keith Corbin, executive director at Nerine Trust.

The story is the same for law firms and trust companies around the island.  Although London continues to play an important role, the real growth is coming from elsewhere. “New business is not coming out of London to large extent. It’s from the Middle East, Russia, Asia and Africa, particularly sub-Saharan Africa,” says Carey Olsen’s Ms Kapp.

But the island’s promotional body, Guernsey Finance, still links its fortunes intimately to the UK’s post-Brexit future, despite more diverse sources of new business.

“As a satellite of the City of London, we are very well positioned,” says Dominic Wheatley, chief executive of Guernsey Finance. “London’s position as a global financial hub is not going to be lost. London will continue to attract business from all over the world.”

There are challenges to Guernsey from rival centres, says Marcus Leese, private wealth specialist partner at Ogier. “Despite the flight to quality, which can’t be downplayed, there are many other offshore centres with much to offer.”