• C++ Programming for Financial Engineering
    Highly recommended by thousands of MFE students. Covers essential C++ topics with applications to financial engineering. Learn more Join!
    Python for Finance with Intro to Data Science
    Gain practical understanding of Python to read, understand, and write professional Python code for your first day on the job. Learn more Join!
    An Intuition-Based Options Primer for FE
    Ideal for entry level positions interviews and graduate studies, specializing in options trading arbitrage and options valuation models. Learn more Join!

Guernsey killing entrepreneurial spirit

Guernsey killing entrepreneurial spirit

‘Starting a business is straightforward in Guernsey’… according to the official government website.

Google the words business, entrepreneur, Guernsey and you may see sufficient evidence to support the government’s above claim. From the Google search you will see that the Island is flooded with start-up’s, mentoring schemes and funding prospects; you will be left feeling that Guernsey is a field of opportunity, where entrepreneurial spirit flows through the very roots and produces hundreds of mini Sir Richard Branson’s.

In the words of Start-Up Guernsey’s Alexandra Kazantseva, ‘I fervently believe that inside everybody there is an entrepreneur or there is entrepreneurial spirit in everyone.’

And Guernsey is the place to be to release that inner entrepreneur right? Well that’s the message we receive...

The island has also voiced its support in promoting IT and Software businesses so that they are not relying on financial services. There certainly is an aroma of opportunity, somewhat reminiscent of the 1849 American Gold Rush in the sense that the Island offers budding entrepreneurs the hope (and promise) of achieving their dreams. But is this opportunist aroma quickly turning into a lingering stink?

Amidst this lingering stink is the fact that banks are starting to shut down business accounts as well as refusing to set-up new business accounts.

With this in mind we decided to see how ‘straightforward’ it was to start a business in Guernsey. We put this to the test by ‘mystery shopping’ for two bank accounts for an online business and an administration business we were setting up. They were simply two small business propositions. In doing this we approached HSBC, Lloyds and Barclays…and guess what? All of the banks said no.

Lloyds took two weeks to look at the admin and then we received an email that implied that there was too much compliance and that they were particularly not interested in the online business. Basically our business was not worth their while. HSBC informed us that they were not taking on any new business and although Barclays said they would look into the administration business they instantly refused the online business. They implied that due to the amount of regulation involved they would spend too much time on this and that it would be impossible to look after.

Banks are blaming over regulation but essentially they are only interested if they are sure they will receive a good return. Are they using it as a way of channelling their profits in a tax-free jurisdiction?

All we were asking for was a simple bank account so that a company could trade! Everybody has a right to start their own businessor so we are led to believe.

Instead, we are forced to let the greedy banks dictate our future. For the mere goldfish that swim around trying to make it out of the fish bowl the future is bleak; however if you’re a blue whale then the ocean is yours to roam free. It is obvious that banks are only interested in regulated businesses and that the big companies receive a ‘yes sir, yes sir, three bags full sir,’ and this is all very well – they are profitable clients - but come on, give people a chance.

Banking on the Channel Islands needs some serious attention and revisions. One thing is for sure –a two-tier regulation system is needed: one for residents and one for nationals. As it stands, residents are required to go through the same procedure as potential offshore clients. As well as being inconvenient – this system is just yet another obstacle aspiring entrepreneurs have to face. Sadly, entrepreneurial spirit is rapidly dying thanks to the greed and laziness of banks.

There is also no financial ombudsman scheme operational in Guernsey so those who are left high and dry by the banks have nowhere to turn – except maybe the job centre. So banks can do whatever they want without consideration for anyone else. It is truly outrageous and small businesses can’t even fight their corner without a financial ombudsman. More than likely they will not be able to afford a solicitor and also cannot afford to spend the time and effort involved in fighting back.

The main politicians in Guernsey need to open their eyes and install a financial ombudsman scheme. They need to ensure that the banks stop treating residents as outcasts and put into action what they preach.

It really is quite ludicrous and why isn’t the Guernsey regulator doing anything about it? It was only in October last year that Steve Williams, director of European Affairs at the Channel Islands Brussels Office, admitted that there was a perception from some that the islands were ‘one- trick ponies’ and only interested in financial services. Guernsey’s leaders, at the same meeting, called for the island to do something else to take a focus away from financial services or tax.

With all of the measures to support start-ups and small businesses through incentives and grant support, translating new business goals and ideas into reality is deemed to be a significant possibility for many.

And it appears that aspiring entrepreneurs are taking note of the all the support. After all, the number of new businesses being registered is now at the highest level since before the 2008 recession. This is easily done but how many fall at the first hurdle without having a bank account?

Lee Perkins, managing director for Sage's small business division recently said this of entrepreneurism:

"Business owners think of an entrepreneur as someone who has innovation in their DNA, but not necessarily the drive or basic business skills to succeed.

"Ideas are vital, but for a business to discover its true potential the company must be grounded in reality and guided by an owner with a sound understanding of financial information."

Anyone would see that this is a valid point but I would argue this: In order for a business to discover its ‘true potential’ it must be given a chance and it must, before anything, be given a bank account. Because the ‘reality’ is - this just isn’t happening. So in order for Guernsey to grow and prosper – small businesses must be given a chance. And why give the banks a banking licence if they are not helping local businesses? Guernsey is rapidly turning into a plutocracy society.

I believe it was the 19th president of the USA, Rutherford B Hayes, who said this of plutocracy:

"Abolish plutocracy if you would abolish poverty. As millionaires increase, pauperism grows. The more millionaires, the more paupers."

So many questions and not enough action or answers…one thing is sure though – Guernsey is slowly and surely killing entrepreneurial spirit. This isn’t just a matter that can be argued about and thrown around back and forth with no conclusion –lives and careers are at stake.

We used to be proud of our banking system. The islanddoes promiseopportunity; an opportunity to make something of ourselves. But as it stands – these are broken promises: pride and opportunity has diminished along with our trust, hope and aspirations.