Guernsey argues that its funds industry channels tens of billions of pounds of investment from around the world into the UK - a riposte to critics of such jurisdictions.

At a time when international financial centres battle for a share of global business amid sometimes hostile political and media coverage, the organisation that promotes Guernsey’s business has fired off a battery of statistics to show how important it is to the nearby UK. And neighbouring Jersey says the European Union has recognised its importance and contributions.

A few days after the UK general election provided a decisive result in the form of a Conservative majority government last week, quashing the risks of a Labour-led administration that might have been hostile to IFCs in some degrees, it would be easy for those IFCs with UK connections to become more relaxed, perhaps. But clearly that is a risk that jurisdictions such as Guernsey, Jersey, the British Virgin Islands and the Cayman Islands aren’t willing to run.

Guernsey’s government, for example, has commissioned “Big Four” global accountancy firm KPMG to produce a report, entitled International Capital Flows. It examines the economic benefits that the island says it provides to the UK and Europe more broadly.

The island’s funds industry acts as a conduit for £24.6 billion ($38.5 billion) of money into the UK from global investors. The report estimates that European investment managers earn £1.8 billion of fees from managing Guernsey funds, of which £1.1 billion is earned by those in the UK. Meanwhile, UK investors, such as pension funds, also benefit from using Guernsey as it gives them wider access to investment opportunities outside of Europe.

The figures add fuel to the debate about the role IFCs play in the global financial system. Critics claim these offshore centres draw away revenues from governments while defenders say they provide tax-neutral conduits for global capital flows that typically end up in productive investments rather than fall into some sort of monetary “black hole”. Low-tax jurisdictions also provide a healthy form of tax competition with states that would otherwise face less pressure to keep their rates down. This has been an argument made, for example, by the Washington, DC-based CATO Institute think tank.

The KPMG report was written by head of advisory Ashley Paxton and advisory senior manager Antony Prynn, both from KPMG in the Channel Islands. Data was provided by local investment managers and administrators and interviews were conducted with London-based industry experts including lawyers, LSE sponsors and investment managers, a statement from Guernsey Finance said yesterday. 

Not to be outdone, Jersey yesterday said that European Union officials have endorsed the island’s contribution to the European economy.

Jersey’s chief minister, senator Ian Gorst, and Guernsey’s chief minister, deputy Jonathan Le Tocq, recently met a range of senior European parliamentarians and the European Commission, including those from the UK, Germany, Ireland, France, Luxembourg, Denmark and Portugal, to discuss the contribution that the islands’ financial services industry makes to the EU’s economy.

Pierre Moscovici, the European commissioner for economic and financial affairs, said the work that Jersey had done was “very much welcome”, and backed the Channel Islands’ “active engagement” in combatting tax evasion, fraud and abusive tax avoidance. He referred to the islands as “important partners to the EU”. He also praised Jersey’s commitment to adopting the OECD’s Common Reporting Standard on automatic exchange of information, according to a statement from Jersey Finance.

This publication is about to issue an interview with the British Virgin Islands about its own ventures in places such as Asia. According to data released by BVI House Asia, for example, the Caribbean jurisdiction is the fourth largest recipient of global foreign direct investment flows, receiving around $92 billion of global FDI in 2013, when full figures were most recently available. The BVI was the second-largest investor into China from 2006 to 2012, providing $7.72 billion of inward FDI into the country in 2012.