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Sunday, 13 January 2013

Budgeting for 2013

I really should update the picture with the new frontage 
What effect has recent States of Jersey policy had on business?


Recently the Town Centre Manager was reported as stating that we were doing quite well to have only 19 empty shops in town and 3 in Liberty Wharf (does anyone even know where Liberty Wharf is?) and of course since then two more shops have gone on King Street; Barretts and Jessops and Play.com have left the building. I took the liberty of looking round town and finding out what the situation really was.

The vast majority of empty shops are in a straight line from the sight of the former Gas Place car park and now they proceed all the way up to West Centre where Riva Menswear has shut it doors. The other dead zone is around the pedestrian area of Colomberie. Now I have no evidence to prove it but on the face of it, it appears that removing 600 car parking spaces and pedestrianising a street appear to have killed business.

There are also a number of shops that are no longer shops at all, just how many shops have been converted back into housing is anyone's guess, but of course these no longer count as empty shops.

The other thing of significance is that whilst many retail shops have closed and been re-filled, what they have been refilled with is coffee shops and sandwich bars. Now is that retail or is it hospitality? Are there any more people to drink all this extra coffee and eat all these extra sandwiches? No, so the money is being spread thinner - which of course means less tax will arise. Will the shops in the area of Play.com feel the effect of losing that many customers?

Spiralling unemployment and ever decreasing numbers of visitors, (just ask any hotel owner), a finance industry which has struggled to maintain its size (in terms of funds under management) at a time when every government has turned on the printing presses and flooded the world with more funds than there was in 2008, in fact there is now 200% more money in the world than five years ago, but Jersey's funds under management have declined? That is an industry in severe decline, in REAL TERMS it is just 33% of the size that it was and it is expected to pay for an ever increasing bureaucracy.

The future for Jersey looks bleak as a direct result of the decisions made by the States of Jersey, and as usual the assumptions upon which their financial projections were based are fundamentally flawed. They will not collect the tax they are predicting, there may not even be enough in their 'contingency' fund for them to be able to have the 'oh we have more money than we thought we did' headline.

Remember the multiplier effect so for every £1 in tax £1.50 is lost from the economy, is lost directly from profits, for every £1 of tax reduced there is £1.50 added to the economy. I did not see any of those calculations considered in the recent budget. So even if 50p is left to spend from every £1, after the inefficiencies and corruption of government have been paid for, to add 75p of value back into the economy, the economy will shrink. But the economy is shrinking faster than that as capital flees the island for the UK, for Portugal, for Poland and let's not be mistaken the States of Jersey spend a lot of money with the UK - consultants, goods and services and on civil servants, I would be surprised if 50p pf every £1.00 remained in the Island.

So I could do what the States of Jersey are doing and make unrealistic projections but since it is my money and my livelihood I think it's stick to the same plan as I have been following since 2009 cutting the cost and improving the service in Jersey whilst expanding into international sales, making the business leaner and meaner and ensuring that the only body that loses out is the body that deserves to lose out; the States of Jersey. This is easily achieved - don't spend any money with businesses in Jersey and thus avoid giving them any GST, and don't employ people thus cutting the SS and ITIS receipts.

Let's see how many businesses can make their rent on the next quarter day - 25th March 2013 and how many shops are empty in April.