Monday, 10 November 2008

And another thing about the Waterfront

One could find fault with the aesthetics of Jersey's Waterfront development – blotting the main aspect of the town with drab, grim and oversized commercial buildings. One could question the environmental quality of the deliberately crowded office and apartment blocks - afraid to sacrifice any saleable floor space to make the area as a whole humanly comfortable. But, most of all, it is the economics that seem absurd. Our ministers talk in awed and reverential terms of the mighty sums of money at stake, but the hypnotic effect of reading all those noughts on the ends of the figures seems to stun them beyond any grasp of the who and how.

For a start, the future of the finance industry, that it is meant to provide a new home for, is currently looking a lot less rosy than its immediate past has been. Expressing official confidence in its continuing health can only help with damage limitation. However, backing the words with nine figure investments is gambling with imprudently high stakes for the unfavourable odds. Beyond that, though, nobody is explaining how the economics work out to Jersey's benefit in the long term. I think that is because they actually do not.

For a start, the States would like Harcourt to invest about a third of a [financial] billion pounds in constructing the monstrosities in the first place. All that inward investment sounds impressive, so long as you don't think about it very hard. But, not all of that vast sum of money is going into the local economy – much will pass straight through. Many of the contractors will be temporary migrants, just here for the job, and spending most of their earnings, and paying their taxes, back home, wherever that may be. There will, doubtless, be a good bit of Ronez concrete and Simon sand used, but the rest of the materials will come from off-island, perhaps with a little mark-up for a local builders' merchant, but more likely bought direct. The architects and other providers of professional services will also be off-island. In fact, the money that is actually injected into Jersey's economy by the development will probably be an order of magnitude less than the headline figure.

Even that much would be nice, if only it would stay in circulation for a little while. However, all that inward investment was just the sprat to catch the mackerel. (Or sand-eel to catch the mackerel, to Jersify the cliché) Harcourt are going to want to see their third of a billion pounds coming back to them, with a nice fat profit on top; say half a billion altogether in property sales, or fifty-odd million a year in steady rents. If they don't, there is no point in them being in business – they might as well put their money in safely guaranteed Irish bank accounts. They will have sucked more out of Jersey's economy than they ever put in, before the fresh, new look has faded from the buildings in the salty air. And, if they sell, the buyers will doubtless finance their purchases with loans that pay interest to bank owners elsewhere, while draining the money to service them out of Jersey's economy. It all adds to Gross Domestic Product, which makes the economy look bigger, but if you look at the flows, instead of just the totals, it begins to look like a lethal wound bleeding it dry.

Or maybe the offshore finance industry has fewer years of large scale operation left in it, than it will take to build the Esplanade finance quarter. Then will we be left with unfinished blocks looming over the town, as signs that we are now closed for business? Even if we had to pay to soothe Harcourt's burned fingers, it may be the better value option.

1 comment:

TonyTheProf said...

And also remember from the States own proposition - the maintenance costs of the sunken road in today's terms are 1/2 million pounds a year!

Just what could be done with that money if that was not done - more equipment for the hospital, improvements to school buildings etc etc