Weekly Client Update – 9th June 2023

Market Overview

U.S. stock futures ticked lower Friday morning after the S&P 500 notched its highest close for 2023. Dow Jones Industrial Average futures fell by 69 points or 0.2%. S&P 500 futures dipped 0.14%, while Nasdaq 100 futures inched down by 0.07%

European markets are expected to open marginally higher Friday. The FTSE will reach 7,606 with an 8-point uptick, according to IG data, while Germany’s DAX will gain 1 point to 15,995. France’s CAC will be up 2 points to 7,226.

Asia-Pacific markets traded mostly higher after the S&P 500 closed at a new high for 2023 and the Dow Jones Industrial Average saw a third straight day of gains. Investors digested China’s consumer price index, which saw a 0.2% rise in May, and its producer prices that fell 4.6% year on year, marking the steepest drop since May 2016.

Mainland Chinese markets were mixed, with the Shanghai Composite up 0.55% and closing at 3,231.4, almost recouping all its losses this week. The Shenzhen Component was 0.66% higher and closed at 10,793.93, extending its rally off its seven-month low on Wednesday. Hong Kong’s Hang Seng index rose 0.87% in its final hour of trade.

In Japan, the Nikkei 225 jumped 1.97% after two straight days of losses, leading gains in the region and closing at 32,265.

Ten Islanders are among candidates for interim government CEO position

A Total of 27 candidates have applied for the interim government chief executive role. Ten of these are Jersey residents, with a further two working internationally but with connections to the Island. Candidates applied from as far afield as Canada and Australia. The search for an interim head of the civil service follows the resignation of government chief executive Suzanne Wiley in March. Two recruitment firms were used in the process, with Thomas and Dessain handling candidates with a connection to the Island and UK-based firm Gatenby Sanderson looking after the international candidates and UK market.

Chief Minister Kristina Moore had previously stated that she would be pushing for local candidates to take on the £250,000 role as ‘there is a benefit to understanding our unique Island, our governance and constitution, as well as respecting our culture, heritage and traditions’. The next stage in the recruitment process involves a technical assessment, a psychological assessment and a final panel interview for a shortlist of five candidates. The final selection is expected to be confirmed within the coming weeks, once contractual details have been confirmed. Deputy Moore said: ‘I am really encouraged by the interest in this role, which demonstrates Jersey’s global presence and the attractiveness of working in our government.’ She added: ‘I am particularly encouraged by the applications that have been submitted from Islanders. They have demonstrated both their passion for our community and the talent we have here in Jersey.’

Draft taxation law lodged for debate

A new draft law has been lodged to make independent taxation compulsory. The legislation is ‘the final stage in the process of moving away from the outdated system of taxing couples differently depending on their marital status’, according to Social Security Minister Elaine Millar. In a report accompanying the draft legislation, which is due to be debated on 18 July, Deputy Millar wrote: ‘With the adoption of the law, a line has been drawn that will result in an ever-decreasing pool of individuals whose marital status determines their tax treatment. The purpose of this draft law is to finish the process already under way, providing Jersey with a personal tax system that befits the 21st century.’ However, in response to what he described as the ‘unpopularity’ of the legislation, Deputy Lyndon Farnham has already lodged a proposition seeking to allow married couples and civil partners who currently complete a joint tax return – and who have not opted for independent taxation – to retain that right. His proposition is due to be debated next week.

Deputy Millar’s draft law constitutes the final stage in a process that began in September 2021, when the States Assembly decided to introduce independent taxation for individuals who are married or entered into civil partnerships after 31 December 2021, as well as for married couples or those in civil partnerships who arrived in Jersey after 31 December 2021 and those opting for separate assessments in 2020 who elected to move to independent taxation. A second phase allowed existing couples to voluntarily elect for independent taxation for the year of assessment 2022. If the draft law is approved by the Assembly next month, mandatory independent taxation will be introduced for all couples from the year of assessment 2025. Recognising that, while the majority would be unaffected by the change, some 6,400 couples would see their liability increase, a ‘compensatory allowance formula’, which will be in place for at least ten years, has been included. ‘It would ensure that the combined tax bill of any couple in this group remains equivalent to that under married couple’s taxation. The effect of the allowance would be greatest in its first year of operation, with the effect eroding with inflation over time. If it was maintained indefinitely, it would perpetuate the difference in treatment between married and unmarried couples, defeating the fundamental concept of independent taxation,’ the report states.

Plan to increase stamp duty on high-value homes

A Backbench politician has proposed changes to stamp duty rates for high-value properties, and called on States Members to do more to initiate policy changes rather than rely on government. Deputy Max Andrews, one of 22 Members elected to the States Assembly for the first time last June, said that he was ‘disappointed’ at the lack of propositions since taking office, and said all politicians had to accept responsibility. He said: ‘Everyone on the backbenches has been in a difficult position – there’s been an expectation for the executive [government] to be coming forward and delivering policy, but the amount of business that’s been coming to the Assembly is disappointing. ‘After almost a year in office, I think that some politicians – including probably myself – need to start doing what they are paid to do and start delivering policy ideas. ‘There are 49 Members, any of whom can lodge propositions, and where the executive is not doing something, then I feel it’s part of the role for a non-executive Member to step up.’

New stamp duty bands for properties with price tags above £5million have been put forward by Deputy Andrews, whose plans are set to be debated in a month’s time. The member for St Helier North said the changes would bring in additional revenue for the Treasury and help broaden the tax system. ‘Personal income tax is often relied on, and I think it would be beneficial to diversify into other areas,’ he said. Currently the rate of stamp duty is constant for properties valued at up to £3m, at which point it increases up to a further threshold of £6m, when a further rise is applicable. Under Deputy Andrews’ proposition, the £3m band would be unchanged, the £6m band would be lowered to £5m, and two further bands would be added at £10m and £15m.Based on recent figures, Deputy Andrews estimated the new rates would have brought in £1.5m of extra revenue in 2021 and an additional £1m in 2022.

Lack of ground staff blamed for long delays at Jersey Airport

Lengthy delays faced by passengers at Jersey Airport are ‘wholly unacceptable’ and risk ‘undermining the visitor experience’, the Economic Development Minister has said. Deputy Kirsten Morel has held urgent talks with both airport management and representatives from ground-handling agent Swissport in a bid to ensure no repeat of the disruption faced by those arriving and departing on Saturday. Some people were held on planes for an hour after arriving while others waited twice as long to retrieve luggage, with engineers, firefighters and customer service staff having to be drafted in to remedy the situation. At least one airline crew took the matter into their own hands, with a pilot and colleagues helping to load bags so that their flight – a Blue Islands service to Bristol – was able to depart on time. Meanwhile, one airline captain called it the ‘worst turnaround’ they had ever experienced with ‘spectacularly poor service by ground staff’.

Swissport, which holds contracts to provide ground-handling services for airlines at Jersey Airport, has apologised to passengers affected by delays, which also drew sharp criticism from airline staff and the Chamber of Commerce. Deputy Morel said: ‘Tourists and Islanders have been complaining, and rightly so. The sort of situation they encountered on Saturday was wholly unacceptable. ‘Tourism is a priority for the Island, not just for the economic benefits it brings but also because it enables us to maintain connectivity. ‘This sort of thing undermines the visitor experience. People may be here for a week and have a great time, but their visit is ruined by three hours of hell at the Airport.’ Swissport said it was ‘urgently reviewing’ what had happened. A spokesperson said: ‘We will continue to work closely with Ports of Jersey and our airline customers in order to address these issues and put contingency measures in place. We are grateful for the significant support and additional resource they have provided.’

An airport director said: ‘Ports of Jersey is sincerely sorry for the impact of Swissport’s staffing shortage on airline passengers on Saturday afternoon. ‘Firefighters, engineers and customer services employees supported the operation as far as possible, but they are not trained or licensed for many of the airside tasks undertaken by Swissport.’ Mr MacRae said that he would be meeting Swissport’s director of ground-handling operations for the UK, alongside Ports of Jersey chief executive Matt Thomas, in an effort to ensure the issue did not recur. Swissport employees are to be supported by Airport staff over the coming days. This will include firefighters driving baggage vehicles and additional help in dealing with passengers, including wheelchair users, who require extra assistance. During the Covid pandemic, Swissport laid off more than half of its 100-strong workforce.

Groceries cost 33% more for Islanders than in budget UK stores

Islanders are paying a third more for their groceries than those shopping in the cheapest UK supermarkets, a new report has revealed. And the average shopping basket will cost 12% more in a Jersey store than it would from the same retailer in the UK, according to the Jersey Competition Regulatory Authority. The authority’s Groceries Market Study, which was published yesterday and which also found that Islanders were spending an average of £112 per week on groceries, said that competition among the Island’s supermarkets was working. Grocery retailers were not making excessive profits and consumers were shopping around, according to the JCRA, while no retailer had more than a 40% share of the market. There were, however, ‘mixed levels’ of satisfaction from Islanders with the Island’s grocery market, with consumers explicitly calling for a ‘discounter’ to enter the market. This lack of satisfaction was, in part, driven by comparisons with the UK, which consumers felt offered better value and better quality than Jersey, according to a survey.

Jersey Consumer Council chair Carl Walker said ‘budget shops’, such as an Aldi or Lidl, ‘would certainly shake things up’. Mr Walker added: ‘A discounter would be welcomed and very popular. I’m sure there are ways the government could assist, encourage or simplify the process for one of these to move to Jersey. But you have to be mindful of existing supermarkets and their employees. It’s a fine balance.’ Inflation has hit its highest rate (12.7%) in Jersey for 30 years, with increasing food prices driving this by 14.2% in the year to December 2022, impacting households’ budgets. The authority found that discrepancies in price between Jersey and the UK stemmed from higher operating costs in the Island, primarily driven by freight and labour, rather than a lack of competition. It costs approximately 10% more for grocery retailers to operate in Jersey, which can be broken down into 3% labour, 7% distribution and 2% sales tax difference.The study found that a higher minimum wage and cost of living (notably from housing), plus a tight labour market necessitating higher wages, heaped costs on retailers that were ultimately passed onto consumers. The report stated: ‘Jersey grocery retailers are not making “excess” profits, which means they will have had little choice but to pass on the considerable inflation in wholesale costs to consumers.

Regulation plans for rental properties welcomed

‘Long- overdue proposals for a licensing scheme to regulate rental properties have been welcomed by the current and former housing ministers. Attempts to introduce similar schemes – including a licensing regime which was narrowly rejected by 23 votes to 22 in 2021 – fell short during the previous government’s term. Environment Minister Jonathan Renouf has lodged draft regulations which, if approved, would make it a requirement for rented dwellings to be licensed under a scheme which would come into force on 1 January 2024. Deputy Renouf highlighted ‘a significant problem with unsafe and squalid private rented dwellings in Jersey’, when he first proposed the scheme in November. Both former Housing Minister Deputy Sam Mézec and the incumbent, Deputy David Warr, have indicated their support for the proposals.

Deputy Warr said: ‘What has changed is that it was all about a landlords’ register last time, whereas this is about laws relating to the property itself, so it’s more targeted.’ He continued: ‘I think that the Council of Ministers is aligned on the need to bring this forward.’Deputy Warr added that the proposals ‘tie-in’ with his ongoing efforts to overhaul the Island’s residential tenancy legislation. Meanwhile, Deputy Mézec described the regulations as ‘long overdue’. ‘The framework being promoted here is essentially the same one that Reform Jersey was promoting which also featured in our [housing] action plan,’ he said. ‘We would have lodged this ourselves but we held back because the [Environment] Minister said he would do so, so we are pleased that he has stuck to his word and it will have our wholehearted support. ‘I just hope that this Assembly has learnt from the mistakes of the previous one because we could have already had this in place for at least two years.’

Jacksons bought out by Dutch automotive group

Car dealership Jacksons has been bought out by Dutch automotive group Van Mossel – with the company confirming that there will be no redundancies as a result of the sale. The transaction has been submitted to the Jersey Competition Regulatory Authority and is expected to be completed by the end of July. Jacksons has six locations across the Island and 500 employees. A spokesperson for the car dealership said: ‘The Van Mossel Automotive Group are a customer-focused operator of the highest standard, investing in the latest facilities, products and people and this deal represents an exciting opportunity for the Jacksons Group.’ They also confirmed that there would be ‘no redundancies and all staff and management will be retained’. With the Jacksons acquisition, Van Mossel will gain locations in the Channel Islands, the Isle of Man and the Isle of Wight.

Eight of the nine brands sold by Jacksons are new to Van Mossel’s current portfolio – namely Aston Martin, Bentley, BMW, BMW Motorrad, Honda Motorbikes, Lexus, MINI, Porsche and Toyota. With sales of 250 million euros, Jacksons is one of the largest dealer groups in the UK. Jacksons chief executive Paul Collier said: ‘I’m delighted to announce the agreement with Van Mossel. ‘We have been negotiating for a significant period of time and I’m confident that their investment and expertise will further enhance our performance and service offerings. ‘Van Mossel is a leading automotive group in Europe and a significant reinforcement of our operations. I look forward to working with them to future-proof the business on the islands. ‘All employees will be retained to facilitate the growth of this unique company. ‘Moreover, the proven concept of Van Mossel allows us to offer our customers more services under one roof in the future. A win-win situation.’