Tech-intensive industries and Jersey's growth challenge

So over the next 10 minutes or so I was just going to run through five themes. So one is what are the major structural changes which are reshaping advanced economies around the world and how they’re impacting Jersey? What’s the role of tech-intensive industries in helping to mitigate some of those pressures? How have those industries performed in Jersey? And therefore the role of Digital Jersey and government more broadly to try and unlock growth in those sectors further.

So to start with, broadly there’s three structural megatrends which are impacting fully advanced economies. That’s populations which are ageing, public sectors which are growing, and productivity which is slowing.

As I’m sure many of you are aware, the populations across particularly advanced economies, in this case OECD countries, have been ageing quite rapidly over the last few decades. The relative share of those over the age of 65 compared to those of working age has really started to shoot up, and that causes all sorts of implications on the economy because changes in consumption patterns start to move productivity further down the supply chain. But it also means that there’s growing demand for things like health and social care, public services, pensions, all that sort of thing.

Which then brings me to the second point which is around the public sector. So partly because of our ageing population we’re seeing increasing demands on the role of government. Across many advanced economies, particularly many European ones but also the UK, you see this sort of jump in the relative share of public spending as a contribution to the economy during the pandemic, but then for the UK and EU countries it kind of stays much more elevated. But that story isn’t true for all countries. In the US, public spending has fallen back to pre-pandemic levels.

And the final one is around productivity. Effectively productivity is how much value is created for every hour that’s worked. And since 2008 we haven’t really seen a lot of productivity growth for most advanced economies. That’s true whether you’re talking about New Zealand or Canada or Germany or the UK. Where it’s different is the US, because again it seems to be this outlier where the trend of growing quite strongly is what most European countries followed before 2008. And that matters because it indicates consumers’ propensity to spend but also suggests how much tax revenue there is for government.

Each of these megatrends which are impacting fully advanced economies are also playing a part here in Jersey. Our population is ageing quite rapidly, in some respects less rapidly than the OECD average, but that’s mainly because inward migration has softened the blow. Since Brexit, you saw this fall in inward migration and the gap where the population continues to age is growing.

The story around the public sector is a little bit more nuanced than what you see elsewhere. The public sector has grown recently, but if you go back 20 years and look at it from the perspective of employment, it’s roughly stood at about 15% of total employment, and that was the same 20 years ago as it is now. So actual employment hasn’t grown that much as a share; it’s fluctuated, went down a bit in the mid-teens and it’s growing more recently.

When you look at spending as a share of GDP it depends if you include state enterprises, so the picture is a bit more complex there. But it’s somewhere probably between the UK and the US.

Productivity is probably the hardest part because productivity on the island has fallen by about 30% over the last two decades. Most of that has been down to a change in composition of the finance industry, but even if you discount that and just look at all sectors outside of financial services, we still haven’t really seen any productivity growth. You haven’t seen even what European countries have seen, let alone what the US has seen.

With that in mind, we wanted to better understand the breadth and depth of the economy outside of financial services and what’s the role of tech-intensive companies and businesses in helping to mitigate some of those pressures around productivity and an ageing population. So we applied this filter to Jersey’s economy where we looked at about 100 different industries and said: are the products that it produces exportable? Are they scalable? Do they employ people with digital skills? Is it a technology or digital solution? And is it in a high-productivity area? If they ticked all of those boxes, we then considered them a tech-intensive industry.

What’s really positive to see is that employment within those industries has grown really strongly in Jersey over the last decade. Since 2014 to 2025, we’ve roughly seen an increase in employment of around 31% and around 1,000 jobs created in those industries, which is a really positive story, partly because those same industries tend to have salaries way above the economy average - about 35% above the economy average, which includes financial services. That’s a really strong story to tell.

We didn’t use the UK definition because the UK definition now includes accountancy and legal services and areas like that, because they take quite a bottom-up approach and for those industries they’re seen as becoming digitally intensive because of the skills being used. But obviously if we use that definition we’re capturing a lot of the finance industries. So to keep them separate and to really understand the breadth and the depth of the economy outside of financial services, we don’t use that definition. But there are clearly barriers to growth because despite the industry doing quite well we’re still seeing productivity fall. So more is needed to reverse that trend.

It’s the usual things that need to be addressed: underinvestment in innovation, acceleration of technology adoption, and investment in skills development. These same themes have been pulled out by the Fiscal Policy Panel. They basically said where there has been growth in government spending, it’s generally been in day-to-day spending and not investment in the productive capacity of the economy.

If we look at the composition of government spending, spending on economic affairs or economic development as a share of GDP is about 1.1%. In the UK, that same figure is closer to 4% of GDP. And if you look at other international finance centres like Luxembourg or Malta, it’s between 6.5% and 7.5%. So arguably there’s more that can be done, and we should be investing proactively in areas that will improve the productive capacity of the island.

Same goes for research and development. Most countries around the world support R&D through grants or match funding or tax relief. For the UK, that represents about half a percent of GDP in terms of support to industry to engage in that sort of activity. In Jersey, it’s probably around 0.01%. Just a fraction of what we see elsewhere.

The other area is obviously education. We don’t have a university here, and in the absence of having a university, our education sector is about 65% of the size of the UK’s in relative terms. A university plays a really key role in enabling wider industries through a pipeline of talent but also spinout companies and the kind of infrastructure that it provides. In the absence of that, there’s more of an exercise to be done to think about how you compensate for that lack of university to still enable the wider ecosystem.

Putting that together, what does that mean for Digital Jersey and the priorities for the year ahead? It would suggest that more needs to be done to assess the impact that its activities and government’s activities have had, to understand what’s working and what’s not. Digital Jersey is repivoting and reprioritising its strategy because obviously the world is changing. There are these structural pressures on the economy as well as a very rapidly evolving technology landscape. So trying to reflect that is important. And finally, more needs to be done to support that innovation ecosystem and encourage more private sector investment more broadly.

To conclude, Jersey isn’t immune to many of the pressures which are impacting other advanced economies. Tech-intensive jobs have performed very well, and it’s worth pointing out that that’s just industries. That doesn’t include digital jobs in non-digital businesses like government and elsewhere. These jobs tend to be quite high value and they do tend to pay more, which is important given that the tax burden in Jersey falls largely to the individual. To fully realise the opportunities it presents, more needs to be done to accelerate investment in areas that will improve the productive capacity of the economy. A clear strategy is probably needed to direct that.