The rapid growth of Europe's leading offshore centres has additionally galvanised the smaller centres. This is in contrast to onshore markets, which are struggling under the burden of increasing EU legislation
Guernsey's finance industry is in a very healthy shape at the dawn of 2007. The growth that was a feature of 2005 continued throughout 2006, pushing levels of business to record highs, and the indications are this upward trend will be sustained in the immediate future.
Business flows for international finance centres such as Guernsey are, by their very nature, inextricably linked to the wider world economy and therefore subject to changes in the levels of global liquidity, where highs and lows tend to be cyclical in nature.
To ensure Guernsey is able to maximise business, whether the global economy is at a peak or in a trough, work is ongoing to improve the jurisdiction's already business-friendly environment and promote it internationally as an ideal location in which to conduct finance business.
Over the past four decades, Guernsey has established itself as a leading international finance centre and the island continues to build on this position. It is still Europe's leading captive insurance domicile and among the top four in the world, with over 625 captive entities.
Guernsey banks continue to record new highs quarter after quarter for levels of deposits, which at the end of September last year rose to more than £89bn - up 15% year-on-year. The fiduciary sector remains buoyant, with 145 licensed companies and assets in trust of some £130bn. Funds under management and administration continue to hit new highs, in excess of £120bn at the end of September last year - an increase of more than 30% on the same period in 2005.
This success is the result of a number of factors, including the recent favourable global economic conditions. Another key component has been the attraction provided by Guernsey's financial services heritage. However, contemporary activities to improve the island's business-friendly environment and also promote the jurisdiction internationally have been crucial. Indeed, both will be developed further during 2007 to ensure Guernsey is able to maximise business flows this year and beyond, whatever the global economic climate.
This year is the 10th anniversary of Guernsey becoming the first jurisdiction to introduce the protected cell company (PCC) and that legislation was amended again in 2006, providing further flexibility in the application of the structure. The incorporated cell company (ICC) was also speedily introduced last year.
In addition, an amendment was made to Guernsey's own professional funds - qualifying investor funds (QIFs). The introduction in early 2005 of this self-certification regime significantly reduced authorisation times for investors meeting the criteria; the definition of an investor was changed during last year, providing extra flexibility.
A root and branch review of investment sector legislation was also carried out in 2006. The working party, chaired by Guernsey advocate Peter Harwood, has recommended the focus of regulation should be on the licensed Guernsey administrator, reducing the number and scope of funds that will be regulated directly and therefore making it easier and quicker to conduct funds business in Guernsey. It has also been proposed that changes be made to facilitate Guernsey service providers to administer non-Guernsey funds. Plans for revising the system of regulation will be implemented, through two initiatives, by mid-2007.
A further working party, led by another Guernsey advocate Rupert Evans, has been reviewing the Trust Law and how it can be updated to benefit the fiduciary sector. The final report recommends extensive changes to the law and proposes the introduction of foundations and purpose trusts, all of which will come on-stream during 2007.
This year the final proposals from a review of Company Law should also go before parliament, while complementary work continues on the modernisation, including automation, of the Company Registry. Similarly, Guernsey's Intellectual Property (IP) environment is in the midst of being overhauled. A dedicated office, solely responsible for its administration and regulation, opened in spring 2006 and a suite of IP-related legislation will continue (with trade marks and design rights having already come into effect) to be rolled out this year.
This year also provides the lead-in to a major set of economic and taxation changes in Guernsey. In June last year the States of Guernsey agreed to a package - the main strands of which come into effect from 1 January 2008 - that includes, as standard, a zero rate of corporate tax. In addition, Guernsey-resident shareholders will be taxed on distributed company profits only.
In terms of personal taxation, Guernsey residents will continue to be levied at 20% on assessable income but this will be limited to a maximum contribution of £250,000. There has also been a commitment not to introduce wealth taxes such as inheritance or capital gains tax.
The agreement to this package highlights the government's continued commitment to enterprise and the finance industry, the main contributor to the island's economy.
It is precisely these ingredients, which make Guernsey a leading international finance centre, that are emphasised in the promotion of the island as an ideal location in which to conduct finance business.
GuernseyFinance - the promotional agency for the island's finance industry - is looking to build on the considerable progress made during last year. The new team, brought together at the end of the first quarter of 2006, has significantly raised Guernsey's profile as a leading finance centre.
An important element of that success has been increased visibility in the international media, which in turn has resulted from work to cultivate stronger relationships, whether that be offers of contributed articles to trade publications, briefing journalists in their home environments or inviting them to Guernsey to see the island and talk face-to-face with local practitioners.
Brand awareness has also been boosted by the renewed vigour of industry cooperation, both in terms of disseminating the key jurisdictional messages and direct input, for example by offering to be GuernseyFinance representatives at conferences. Indeed, in 2006, the agency participated at several major fund and insurance conferences across the world, with a geographical spread that took in Brighton, Bournemouth, Hertfordshire, Frankfurt, Luxembourg, Cannes, Monaco, Hawaii and Dubai.
There has also been close liaison with the industry over the 2007 schedule and GuernseyFinance is already committed to attending many of the same events as last year, with the notable addition of Cannes' property event MIPIM and the fiduciary event, Transcontinental Trusts in Geneva.
Promoting these sectors in London is also important for Guernsey because the City is a key source of new business. As such, the fund, insurance and fiduciary associations, in conjunction with GuernseyFinance, are holding conferences there. Guernsey Funds 2006 - The Alternative Solution, held in late September 2006, was very successful. In March the insurance sector will take centre stage at the Guernsey Insurance Forum and a similar half-day fiduciary event will be held in late April. These conferences provide a great platform for each sector to raise its profile, convey its key messages and showcase its expertise.
Work in 2007 will continue to identify and capitalise on significant new business streams around the world. China (specifically Shanghai), Hong Kong, the Middle East and Eastern Europe have all been earmarked as locations where it would be most beneficial to more actively market Guernsey as an international finance centre.
Last year, GuernseyFinance made a jurisdictional visit to Hong Kong and Shanghai and visited Dubai for participation at Private Equity World MENA. The team, aided by an additional member of staff tasked specifically in this direction, will during 2007 be looking to build on existing relationships as well as forge new ones to help realise the potential within these key emerging markets.
The Right Conclusion
Guernsey's finance industry at the start of 2007 is thriving. This is the result of a number of factors, including the recent levels of global liquidity that will always impact on the business of an international finance centre. Also crucial have been activities to improve the environment for conducting business on the island and promote the jurisdiction internationally. These streams will be developed further this year to ensure Guernsey, whatever the global economic picture, is maximising business flows.
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