The IoD Guernsey’s Second Directors’ Economic Confidence Survey shows a fall in confidence between May and November 2024 with business leaders feeling pessimistic about the Guernsey economy over the next 12 months.
The survey also reveals that respondents expect profits and investment to decrease against a backdrop of costs that continue to rise.
The survey showed a net positive % reading of -25% confidence in the local economy, lower than the -18% result in May 2024, but considerably higher than the UK at -58%.
However, mirroring the May findings, respondents are quite optimistic about their own organisation over the next 12 months with a net positive % reading of +47%, which is much higher than the UK’s 2%.
In terms of different sectors, 12 out of 16 industries represented in the survey, including financial and professional services, posted net positive results for the question: How optimistic or pessimistic are you about your own organisation over the next 12 months?
Respondents on balance expect their revenue over the next 12 months to be higher with a net positive % reading of +32%. This compares with +30% in Guernsey’s May 2024 survey, and +15% in the UK’s most recent results.
The survey also highlighted an expectation that costs will continue to rise over the next 12 months, with a net positive reading of +66%. This compares with +74% in May 2024, suggesting cost pressures remain elevated but are moderating, and +82% in the UK.
Unsurprisingly, business leaders expect their profits to be lower over the next 12 months with a net positive % reading of -10%. This compares with +1% in May 2024. This helps to explain why investment intentions have declined slightly, from 21% to 18%.
More respondents expect their headcount to be higher over the next 12 months with a net positive % reading of +12%, compared with +6% in May 2024.
The Guernsey economy is now one of the top five issues having a negative impact for respondents. Concern over the other top five issues from May 2024 have moderated slightly but are still high, including air and sea links, labour, skills and housing, whilst regulation has fallen to 8th place.
Political uncertainty, regulatory compliance and uncertainty over tax reforms all polled as higher concerns in November, compared to the first survey in May 2024.
These themes were mirrored in general comments from respondents, with statements focusing on transport links to the island, uncertainty over tax reform, the structural deficit and lack of government policy support for business.
Richard Hemans (pictured), the economic lead for the IoD Guernsey Branch said: “The results show that confidence has deteriorated, with optimism about the Guernsey economy and profit expectations both falling.
“The survey was completed against the backdrop of the structural fiscal deficit and uncertainty over how it will be filled, stubborn inflation, the ongoing housing shortage and well-publicised difficulties with air and sea links.
“However, reflecting the results of our first survey, respondents remain confident about the prospects of their own organisations. Results show that they expect costs to increase at a slower rate and plans to increase employment are in place, which is positive.
“Overall, Guernsey economic confidence is higher than the UK where indicators have plummeted since the new Labour government came in and as a result of uncertainty around the impact on businesses of higher taxation and borrowing.
“The IoD’s survey received feedback from over 20% of the organisation’s membership, which is an excellent result and gives the survey strong statistical validity. Financial services sector represented 59% of survey respondents, but there was good representation across all sectors, meaning that respondents approximately mirrored the island’s industrial make up. ”
Mr Hemans continued: “We would like to thank everyone who took part in our second survey. The data will help us shape the IoD’s future activities, alongside the recently conducted research on social capital. As before, we will share the data with Deputies and senior civil servants and we look forward to working with policy makers and other business organisations over the coming months to understand and help to improve business confidence.”
