Client Weekly Update – 27 January

Market update

European markets are higher today with shares in Germany leading the region. The DAX is up 0.24% while London’s FTSE 100 is up 0.18% and France’s CAC 40 is up 0.15%.

Yesterday afternoon the Dow Jones Industrial Average was up 205 points or 0.6%, while the S&P 500 was up 1.1%, and the NASDAQ Composite was up 1.7%.

The indexes are rallying to start the year. The Nasdaq is up 2.7% so far this week and on pace for its best month since last summer.

Asian markets finished higher today with shares in China leading the region. The Shanghai Composite is up 0.76% while Hong Kong’s Hang Seng is up 0.36% and Japan’s Nikkei 225 is up 0.07%.

Inflation in Jersey hits 12.7% – Fears for vulnerable Islanders as inflation hits a 40-year high

Islanders already struggling with the spiraling cost of living may face more misery as Jersey’s inflation rate increased to 12.7% – a figure not seen since the 1980s.

The primary drivers behind the shocking figures – released yesterday by Statistics Jersey – were housing costs, which had increased by 24.4% over the previous 12 months, and food prices which had risen by 14.2% Every single economic factor went up according to Statistics Jersey, with the cost of heating and lighting properties seeing a 22.7% increase while motoring costs grew 12.3% this year.

Islanders in groups already hardest hit by the rising cost of living will face further difficulties, as inflation for pensioner households and low-income households went up by 10.3% and 8.5% respectively.

This is the largest increase in RPI Pensioners and RPI Low Income since December 2007, when these specific price indices were introduced in Jersey. Economic Development Minister Kirsten Morel said that the ‘headline figures are not pleasant but not unexpected’.

He added that while it was ‘obvious that prices are increasing in the island’, the ‘RPI figures are not telling the full story in Jersey’. He said: ‘The largest component of the increased inflation is interest rates. However, this only directly affects homeowners without fixed-rate mortgages.’

Deputy Morel said that the government would ‘continue to watch’ the impact of inflation but confirmed that there would be ‘no knee-jerk reactions’.

He added that he would be chairing a cost-of-living meeting next week, which would ‘review’ areas including the package of measures announced in the government’s emergency ‘mini budget’ last year, which included tax threshold rises and increases to benefit payments.

The budget also included a cut of 2% in Social Security contributions. However, this reduction was only temporary and ended on 31 December 2022.

Social Security Minister Elaine Millar said that it was unlikely that a similar reduction would be introduced in the near future as ‘the changed tax allowances will counterbalance the return to normal contribution levels from January’.

However, she added that this would be kept under review. Jersey’s inflation rate has been rapidly increasing since September 2021 – when it stood at 2.9% – and the latest statistics have prompted fears that already-struggling Islanders may need further government support to help them through the cost-of-living crisis.

Jersey Consumer Council chairman Carl Walker said: ‘Experts seem to be suggesting that prices may have peaked. Whether that is true I do not know but inflation is still astronomically high and this demonstrates that Islanders are still going to need help into the summer.’

Mr Walker noted that recent hikes in the cost of electricity and milk, which he described as ‘two staples of everyone’s budget’, were yet to be reflected in the RPI figures. ‘We have also seen some big pay rises in the public sector that could potentially be reflected in the private sector, meaning that companies may need to raise prices,’ he continued.

‘It may well be the case that the government needs to extend some measures – such as the reduction in social security – to help Islanders get through the winter.’ Last year, the Fiscal Policy Panel predicted that inflation would peak at 12% by the end of 2022, before falling back to a forecast of 2.4% over the four-year ‘horizon’ period.

There have been signs in the UK that the inflation rate may be starting to taper off, with Bank of England governor Andrew Bailey stating that a ‘corner has been turned’ and that inflation could ‘fall rapidly’ following a slight drop in the UK’s latest figures.

Earlier this week, Guernsey’s RPI was confirmed as having increased by 8.5% at the end of last year.

Ineffective’ government funding may be putting young Islanders off going to Uni

Young people may be deterred from pursuing higher education because of ‘ineffective’ government funding amid spiraling costs across the UK, according to a member of a campaign group.

Nicki Heath, from the Student Loan Support Group Jersey, which provides support and information to parents whose children are going to university, has called for the higher-education maintenance grant to be reviewed annually with a view to moving it in line with the rate of inflation.

She said that the system was not providing enough support for parents who could not afford to university.

Last year, the group called on the government to provide extra financial support for university students who were struggling to deal with the rising cost of living, energy bills and expensive flights to and from the UK.

This led to Children’s and Education Minister Inna Gardiner introducing a 7.2% one-off top-up for those currently receiving higher-education maintenance grants. This, in combination with a 2.9% increase that was introduced a month prior, brought the total increase to 10.1% for the academic year.

However, Mrs Heath believes more needs to be done to support university students and their families. ‘The top-up was just a one-off,’ she said. ‘Since 2018, we have only had one permanent increase of 2.9%, which is a bit of problem when inflation has increased by around 21% since 2018 and the costs of everything keep going up.

‘It just doesn’t add up. The system has become ineffective again when you have inflation increasing like it is. ‘It seems crazy that the system has got to a point where it is stopping students from studying because parents don’t have that kind of disposable income,’ she added.

Mrs Heath said there had been no talk with the government about an annual increase in the grant. ‘We should have an annual review of the system with a view to applying an increase each year. This would give people certainty about the potential to carry on their studies and would help make education accessible to all,’ she said.

Mrs Heath said that while the end-of-year top-up had been a welcome relief for many families, it had only been ‘a drop in the ocean’ for some. ‘Due to the big drop-off in money awarded based on the income threshold, it has been more difficult for some families,’ she said. ‘I appreciate economic times are difficult but they need to make the sliding scale more gentle.’

Currently, those studying in higher education in the Island receive the same maintenance grants as students attending university in the UK. ‘Other places in the UK have different maintenance levels depending on whether you’re studying at home or further afield,’ said Mrs Heath.

‘We need to do the same because the costs are different for someone studying in the UK, compared to someone who may still be living at home but undertaking a higher-education course in the Island. ‘I know Inna is looking at this and hopefully it can be changed,’ she added.

Under the current offering, which includes the 2.9% increase, a student going to university in the next academic year and from a household with an income between £50,000 to £59,999.99 would qualify for a £6,174 maintenance grant for an academic year. However, the 7.2% top-up last year meant that the total would have been £6,618.

Drones could be used in Jersey as air taxis

Drones could be used in search-and-rescue operations, fisheries patrols and eventually as air taxis across the Channel Islands, Ports of Jersey has said as preparations continue for a trial of unmanned aircraft.

A delegation from Ports visited Guernsey last week to provide a technical briefing on the planned trial, which is expected to take place in spring 2024.

Last year, it was announced that Jersey had been chosen as a testbed for the UK-government-funded Agile Integrated Airspace System programme, which will see drones used to test cutting-edge aircraft-guidance technology.

The ultimate aim is for autonomous unmanned aircraft to be used across the UK and Europe. Explaining why Ports of Jersey became involved in the project, Airport director Robin MacRae said: ‘We see ALIAS as a great opportunity, not just for Ports, but for the Channel Islands.

‘It will enable us to move essential medical supplies, bolster our search-and-rescue capability and eventually provide air taxi services with the Channel Islands. ‘Sustainability is also important to us. We want to make swift progress on the decarbonisation of aviation so we are keen to pursue opportunities to work with like-minded partners.’

During the trial, drones will be flown in 60 sq/km of low-traffic airspace about half a mile offshore and away from nature reserves.

The aircraft, which will use specialist guidance software from technology firm Volant Autonomy, will fly below 3,000 feet – a height well below commercial-aircraft flight paths. Ports have confirmed that the drones will be fitted with cameras to film the trials but that no images will be taken of Islanders.

Drones have already been used in various parts of the UK to deliver supplies or assist in emergencies. The craft delivered chemotherapy and prescription drugs to the Isle of Wight during the pandemic so that residents did not need to travel to the mainland.

The UK Coastguard has trialed using drones during search-and-rescue missions, and the Royal Mail is planning to deploy a fleet to deliver items to Shetland and other remote island communities.

Jersey Met may introduce rainfall warnings

Jersey Met is to consider issuing ‘rainfall event warnings’ in future to enable Islanders to prepare for severe weather. The agency was this week caught by surprise by two storms which rolled in on consecutive days, bringing extreme conditions which were not predicted by initial forecasting models.

The first – an intense low-pressure system which barreled in from the Atlantic on Sunday night – was expected to send the worst of its weather over the eastern half of the Channel. But the storm, eventually named Storm Gerard by Météo France, changed track late Sunday evening – hitting the Island with severe-gale-force-nine winds and gusts of 70mph which felled dozens of trees.

The following day Jersey Met forecast that a second storm would bring between 15mm and 20mm of rain, before clearing southwards. But the weather system effectively stalled over the Island, dropping almost 60mm of rain and causing severe flooding in Grands Vaux. If the heavy rain had been predicted, Jersey Met says it would have notified other government departments. It would not, however, have issued a public flood warning, as this does not currently form part of its portfolio of weather alerts.

The agency is now working with other government departments, during its analysis of the week’s weather events, to determine whether formal rainfall warnings should form part of future forecasting. Explaining the lead-up to the arrival of the first storm, Paul Aked, head of meteorology at Jersey Met, said:

‘During the weekend we were monitoring a rapidly developing low-pressure system, moving towards the islands from the west. Given our size and position in the Atlantic, it is extremely difficult to predict weather systems like this and there were large uncertainties around this particular system’s track and depth. Details of how strong the winds would be and where would be most affected did not become clear until late Sunday evening, when we began to see the track of the low pressure moving the most severe winds from Normandy and the eastern half of the Channel to come closer to the islands than expected’.

‘This brought severe gales from the north/north-west, a wind direction in which trees here are more vulnerable. As a result, a large number of trees were felled, exacerbated by the saturated ground from recent heavy rainfall, and we also saw localised structural damage’.

Mr Aked said that an orange wind warning – the second-highest level of alert – was issued before the worst of the winds hit, but that 24 hours earlier it was simply not expected to ‘develop into such a vigorous system’.

On Monday, forecasters were monitoring the development of the second low-pressure system, which was expected to deposit between 15mm and 20mm of rain overnight and into the following day.

‘In reality, the fronts became slow-moving across Jersey, resulting in a longer period of heavier rain than forecast, with 58.6mm at Howard Davis Farm, equivalent to two weeks of rain falling during this event,’ said Mr Aked.

He added that the department used a combination of computer models and local knowledge and experience to forecast weather, and that ‘this leads to accurate forecasting most of the time’. But he admitted that it was ‘sometimes difficult’ to forecast finer details during ‘certain weather situations’, such as the recent floodings.

Cold-water-shock warning issued after two people are rescued from capsized boat in St Aubin’s Bay

Jersey Coastguard has issued a cold-water-shock warning after two people – who were not wearing lifejackets – were rescued when their rowing boat capsized. The pair were saved after falling into the water in St Aubin’s Bay.

In a statement, the Coastguard warned that the incident could have ended in tragedy. They said: ‘Recently Jersey Coastguard responded to a capsized rowing vessel in St Aubin’s Bay. Neither of the two persons on board were wearing lifejackets when they were plunged into the 9°C water. ‘Thankfully, despite the lack of lifejackets and the risk of cold-water shock, both persons were assisted safely ashore.

‘The situation, however, could have easily not had a happy ending. Cold water shock is an involuntary response by the body being suddenly or unexpectedly immersed into water which has a temperature of less than 15°C. After falling into cold water blood vessels in your skin will close and the output from your heart will rise causing your blood pressure to increase – this will put your heart under strain and could cause a heart attack.’

‘The sudden cooling of the skin can also make you gasp involuntarily and increase your breathing rate which can cause you to inhale water panic and drown. A correctly fitted, in-date serviced lifejacket will keep a person’s head clear of the water, reducing the risk of inhaling water, and keep the person floating even if they are unconscious. We have posted about wearing lifejackets many times, but we can’t overemphasise their importance if you are out at sea. Lifejackets really do save lives.’

‘Cannabis should be free as part of health service’

The government should consider making medicinal cannabis freely available as part of the Island’s health service, a States Member has said.

Deputy Lyndon Farnham also believes that a flourishing medicinal-cannabis industry would have a clear economic benefit to the Island and hopes the government will continue the work he started while Economic Development Minister which aimed to make Jersey a leading jurisdiction in the field.

Speaking at a London conference in 2019, Deputy Farnham announced his intention to make Jersey a ‘centre of excellence’ in medicinal-cannabis production. He subsequently brought forward legislation and introduced licensing schemes to facilitate cannabis- and hemp-growing in Jersey.

The local industry has grown rapidly over the past couple of years, with a small number of medicinal-cannabis growers and various clinics which privately prescribe the drug to patients. Deputy Farnham’s recent comments come after a planning application was launched by Green View Ltd to build the necessary facilities to grow the crop at La Verte Vue farm in St Mary.

And the St Mary, St Peter and St Ouen Deputy hopes that cannabis can soon be offered to patients in a similar way to other prescription medications. ‘The government should seriously be considering making medicinal cannabis freely available as part of the health service. I don’t see medicinal cannabis being different from any other medicines which require strong legislation,’ he said.

‘Currently, medicinal cannabis is prescribed privately and its availability to support Islanders is a big challenge due to its cost, which makes it out of reach for many,’ he added.

Deputy Farnham said he would encourage Health Minister Karen Wilson to look at the benefits of making medicinal cannabis more readily available for those who need it. He added that he would be happy to assist his colleagues if they were to consider such a move.

‘The other side of medicinal cannabis is the production of cannabis derivatives for export to pharmaceutical businesses globally and that is a key area,’ he said.

‘I understand that is progressing and the current government has good foundations to build on. There is definitely the opportunity for great economic benefit through tax revenue, career opportunities, productive use of land and it could also encourage people studying in related fields to come back to the Island.’

However, Deputy Farnham does not believe there will be a significant rise in the number of medicinal-cannabis producers in the Island.

‘We have to remember it requires significant investment. We have been international leaders with the way we have been licensing and hopefully we will continue to see a low, sustainable number of facilities producing high-quality medicinal cannabis,’ he said.

Last year, Simon Harrison, from campaign group End Cannabis Prohibition Jersey, said that if the Island wanted to be a centre of excellence in medicinal cannabis, it should consider building a cannabis clinic as part of the new hospital.

Deputy Farnham echoed those thoughts, adding: ‘I would hope any new hospital would embrace modern methods of medicine once we understand what the clear benefits to that medicine are.’

 Shopping bag sales tumble as plastics law hits home

The Co-op has seen a significant drop in shopping bag sales in the past six months as customers ‘adapt’ to new legislation designed to reduce plastic usage.

The community retailer has said it is selling nearly 7,000 fewer bags a week, following the introduction of Single Use Plastics Law in July last year – which meant Islanders could no longer receive single-use carrier bags with their purchases.

Under the law, shops, traders and restaurants are also required to charge at least 70 pence for any reusable bags that they issue.

Carl Winn, the head of community and sustainability at the Channel Islands Co-op, said: ‘Based on a weekly average comparison since the change in the law, we are now selling nearly 7,000 fewer bags a week. It is good to see that our customers and members have adapted to the change. But ultimately, we are proud that it is our environment which is benefitting from less plastic polluting our beaches and countryside. There is still more to do and our new reusable bags which we have recently introduced will further help to reduce our plastic consumption.’

A six-month ‘using up’ period – which allowed traders to get through any non-compliant bags they had in stock at the time – ended on Saturday (21 January). A spokesman for SandpiperCI, which operates franchises including Morrisons Daily, Iceland and Costa in Jersey, said the new 70p charge had reduced the company’s plastic bag usage by 60%.