The Institute of Directors Guernsey opened its 2025 programme with a webinar exploring the UK economic outlook and its implications for Guernsey.
The event featured Anna Leach, Chief Economist at the IoD, and Richard Hemans (pictured), IoD Guernsey’s Economics Lead, who shared their perspectives on key trends shaping the economic landscape.
Mrs Leach highlighted the pressures and opportunities within the UK economy. Business confidence saw a sharp decline in late 2024 due to policy uncertainty and negative rhetoric but showed signs of recovery in December. She outlined that UK economic growth in 2025 is projected to be between 1.2% and 1.6%, driven by public sector spending offsetting weaker private investment. Inflation is expected to decline to 2.75% by the end of the year, supported by modest interest rate cuts. However, global policy uncertainty and fiscal pressures pose ongoing risks.
Turning to Guernsey, Mr Hemans emphasised the economic challenges facing the island. He contrasted Guernsey’s stagnant GDP in 2024 with Jersey’s growth, driven by a booming banking sector. He noted that Guernsey’s higher inflation, influenced by housing and transport costs, is a persistent issue. Rent inflation also rose by 8% last year, adding to affordability challenges.
“Guernsey’s economy faces a number of headwinds” Mr Hemans explained. “Labour participation has declined, limiting economic output and increasing our reliance on immigration. Addressing these structural issues will require bold and coordinated action.”
Mr Hemans also highlighted Guernsey’s structural deficit of £38 million, suggesting that the introduction of a Goods and Services Tax (GST) could provide a sustainable revenue source. While a small surplus in public finances is expected in 2025, fiscal tightening is likely to constrain growth further. GDP growth for 2025 is projected to remain around 0–0.5%, with inflation forecast to decline but stay elevated at 3.5%.
Despite these challenges, Mr Hemans stressed Guernsey’s resilience and its capabilities to adapt: “We need to acknowledge the issues facing our economy and work collectively to address them. With the right leadership, collaboration and future focused strategies, Guernsey can overcome these challenges, as it has done before.”
