Speaker: His Excellency Mr. George Fergusson, Governor and Commander-in-Chief of Bermuda
Date: 10 July 2015
Venue: Guildhall, Gresham Street, City of London, EC2V 7HH
Time: Annual General Meeting: 12noon
Annual Lunch – Reception: 12.30pm; Lunch: 1.00pm till 2.30pm
Chair: Robert S. Childs, Chairman of The Bermuda Society and Chairman of Hiscox
Synopsis of the Governor’s Speech:
“Bermuda: Host of the America’s Cup – in fair winds or foul?”
Bermuda’s history has seen the Island ride challenges to its economic model right back to the struggle between tobacco-growing and its first maritime services sector in the 17th Century.
Bermuda’s last wave of economic exuberance, irrational or not, ended in 2008. Aftershocks have continued since. The population has fallen, with many expatriates and locals leaving. Several major company headquarters have left – offset by some, though fewer, coming in. GDP has fallen annually since 2008, but looks likely to rise this year. Fiscal challenges remain. The deficit has stopped rising and is planned to come down, to $220 million, this year. But government projections showing that the deficit will continue till 2018-19 mean that the debt will continue to rise, with the heavy drag of debt service remaining on the budget. This year will at least see expenditure, minus debt servicing, come to less than revenue, reflecting the major efforts the Government has made.
This is all familiar. But I want to make three observations.
Cutting public expenditure is never easy: Barbados, Ireland, the UK have all succeeded to some extent but with difficulty and inevitable pain. SAGE – the Savings and Government Efficiency Commission – did a thorough and commendable job in analysing the problem and setting out proposals for change, though without a remit to look at revenue solutions. Bermuda faces all the same difficulties as other jurisdictions. But it has in addition some particularly awkward ones to do with social cohesion. Cuts in employment so far have fallen mainly on the private sector. There, they have been spread across the community, including many, local and expatriate, some with the option of leaving. Cuts in a public sector which has grown significantly this century will be more likely to fall most on the community which has had historic disadvantage, and is still relatively disadvantaged. That does not take away the need for the deficit to be reversed and the debt reduced. But it presents an especially difficult challenge for Bermuda’s Government to address. In different ways, it would present difficulties for either Bermuda party. Uncomfortable cuts are nonetheless inevitable at some stage. There may be some help on the revenue side: the Government has commissioned a review of that, due to advise later this year. And there may be help through stimulating new enterprises, in financial services, tourism and beyond.
Meanwhile, Bermuda is facing a largely unforeseen shock to its re-insurance sector, at least to its size and scale, through the very rapid arrival of companyconsolidations. This will almost certainly substantially reduce the number of senior executives and underwriters based on the Island, with knock on effects into their back-up in accountancy, the law and banking, and then to wider multipliers. The effects of this are only now being fully digested. The likely extent is not yet clear. But it adds to the challenge, and the pressure to diversify.
Against this background, the arrival of the America’s Cup contest was the most unexpected and most tangible new stimulus. The economic boost will be real. Two teams are already based on the Island, with between 40 and 75 ‘staff’ established. Two more are likely later this year, with others to follow. Even before the boost to tourism or Bermuda’s marketing profile, the teams’ presence is inserting welcome cash. 2017 will be spectacular: America’s Cup, Tall Ships and some other events still lining up will make it a bumper year. The challenge for Bermuda is to plan to ensure that January 2018 brings more than a hangover, and is instead another step towards achieving ambitious but sustainable targets for, say, 2020. These can most obviously be in tourism – setting targets now for arrivals, for long term infrastructure, for tourism-related employment, particularly of Bermudians. The targets could, ideally, include ones for other appropriate niche industries, using the potentially massive marketing lever of the America’s Cup and the boost to confidence in the immediate future.
There are strong gusts forecast over the next few years: unexpectedly favourable winds as well as some unexpectedly unhelpful ones, overlaid on the already complicated pressure systems of the public finances. Bermuda has shown a remarkable ability to cope with difficult weather – literally in the past year, as well as figuratively. I am confident that it will do so again; but it won’t all be plain sailing.
H.E. Mr George Fergusson
Governor and Commander-on-Chief of Bermuda
10 July 2015