Stability Must Cut Through for IFCs in a Fragmented Global Landscape

Over the past few years, the concept of a ‘polycrisis’ has been ever present in the world of international financial services.

It’s a term that describes a situation where multiple, interconnected crises interact and amplify each other, creating a complex and challenging situation that is difficult to manage. And it’s a term that I’ve used frequently to set the scene in the talks I’ve given at multiple events.

Since the financial crisis in 2008, we’ve seen this emerge on multiple fronts and manifest in different ways – through rapid changes in technology; a demand for growth in sustainable finance; challenges and opportunities presented by a global pandemic; social unrest; war; and geopolitical shifts at a national and international level.

In the UK, this narrative has revolved around a cost-of-living crisis and ongoing economic and political uncertainty — fuelled in part by societal polarisation and shifting tax debates, including recently around discussions on the outward migration of wealthy individuals, families and ‘non-doms’.

In Europe, the war in Ukraine has had wide-reaching effects on energy disruption, refugee flows and increased defence spending, which is straining regional budgets and stability, while waves of migrants are reigniting debates around borders, fuelling populist politics.

In China, the context is around economic slowdown, demographic shifts and strict information control, while in the Middle East, conflict in Gaza has intensified regional tensions, with ripple effects on diplomacy, energy markets and humanitarian concerns.

And of course, the US has been central to global dynamics, through a programme of tariffs fuelling trade wars, challenging climate-related discourse, and driving domestic polarisation.

The end result? A complex picture – highly charged, fragile and fragmented. A new era, marking a shift away from an assumption towards globalisation, to something far more nuanced, fluid and intra-regional as far as trade and investment are concerned.

Competition

All this is highly pertinent to international finance centres (IFCs) like Jersey.

This new era has highlighted both the risks and the opportunities of engaging globally – underscoring the need for stable, trusted IFCs to help channel capital responsibly and support long-term sustainable planning. Capital protectionism can only distort investment dynamics and is not good at generating efficiencies and ensuring market transparency. IFCs can provide an antidote to that.

Because in the conversations with firms in Jersey and clients of Jersey, the focus is still very much on supporting cross-border capital flows.

This summer, our global market development team from across the UK, Middle East, Africa, Asia and US hosted an update on the trends they are seeing in their markets and the message was clear:families, investors, institutions, asset managers and businesses are still focussed on international diversification to drive growth, create wealth and mitigate risk.

It’s a sentiment consistently reflected through our family office roundtables; our events in Asia and the Middle East, US and Africa; through our Funds Focus events in London; and it will be a central theme running through our private wealth conference in September, which will focus on reputation as a strategy.

To take the US as an example, a recent article in The Economist highlighted that ‘foreigners’ own US$62 trillionn-worth of American assets compared with only US$36 tillion of ‘foreign’ assets being owned by Americans. The US needs foreign investors, and foreign investors need the US.

Cross-border flows are critical to everyone – but the context of those flows is shifting.

The reality is that the complexity caused by this polycrisis is going to need sophisticated, stable, trusted IFCs if businesses are to thrive; if governments are to achieve their FDI objectives; if investors are to drive growth; if families are to sustain wealth’ if sustainable finance targets are to be met; if philanthropic endeavours are to have their desired impact.

And to that end, Jersey’s platform remains as attractive and more important as ever. The stability Jersey offers in this era of the polycrisis must cut through.

But we are under no illusions; this new era will be extremely competitive – and this was brought home recently when the Government of Jersey hosted its mid-year update, focussing on its competitiveness programme; a strategic initiative aimed at strengthening Jersey’s position as a globally attractive IFC. It is welcome that Jersey’s Government is focussed on competitiveness as a strategic priority, because we are competing against other major hubs around the world.

I was pleased that a number of measures have already been announced as part of this initiative, including enhancements to the popular Jersey Private Fund regime and a proposed simplification of Jersey’s ‘Sound Business Practice Policy’ (SBPP), underlining that Jersey is very much open for business. We anticipate further announcements in due course as this initiative progresses.

And all this runs parallel with our own Vision 2050 project, which aims to anticipate and respond to global trends to position Jersey at the forefront of innovation in financial services – in areas such as financial technology and building a resilient and sustainable workforce. It’s a project that brings together our reputation for upholding international standards as evidenced through Jersey’s latest Moneyval assessment – with our industry’s commitment to evolve.