Jon Bond

Small Island, Big Ideas

  • Guernsey’s 2025 Accounts: The Headline Looks Good, The Small Print Is More Complicated.

    Guernsey’s 2025 Accounts: The Headline Looks Good, The Small Print Is More Complicated.

    The States of Guernsey has just released its consolidated financial statements for 2025 and the headline figure will catch your eye: a reported net surplus of £106 million.

    After years of discussion about a structural deficit and the need for fundamental tax reform, that sounds like good news. But read past the headline, and a more nuanced picture emerges – one that has significant implications for every business and resident on the island.

    What the Accounts Actually Show

    The States of Guernsey Consolidated Accounts (including the States itself, plus entities like Guernsey Water, Guernsey Electricity, Guernsey Ports, Guernsey Post, Aurigny etc.) reported:

    • Total revenue: £1.25 billion (up 14.4% from £1.09 billion in 2024);
      • Tax and social security made up £881 million
    • Total expenditure: £1.18 billion (up 6.3% from £1.11 billion in 2024);
    • Net surplus: £106.1 million (compared to a surplus of £20.3 million in 2024);
    • Net assets: £4.08 billion (up from £3.92 billion in 2024);
    • Total debt: £403.5 million.

    On the face of it, the improvement is dramatic — an £86 million swing in one year.

    Why the Treasurer Is Urging Caution

    Here is where it gets interesting. The States Treasurer’s own report, published alongside the accounts, is notably careful about what the surplus actually means.

    The £106 million net surplus figure includes £118.9 million in unrealised investment gains on the States’ £1.73 billion investment portfolio that have not been realised. Strip those out and the underlying operating position is actually in deficit.

    The Treasurer’s report goes further: “With one-off items and unrealised investment valuation excluded and after adjusting for the long-term capital investment requirement (2% of GDP), the underlying financial position of the group had a funding gap to close of some £50 million in 2025.”1

    In other words, the States’ own assessment is that on a sustainable, recurring basis, Guernsey is still spending around £50 million more per year than it earns.

    The One-Off Items That Won’t Come Back

    Two specific items inflated the 2025 figures and are explicitly flagged as non-recurring:

    • £39 million from Pillar 2 tax. Guernsey implemented the OECD’s global minimum tax on the profits of large multinational companies in 2025. The first year produced £39 million of accrued income, but critically, a significant portion of this has been recognised in the accounts now but will not be collected until mid-2027. The cash hasn’t arrived yet, and it is a new revenue stream whose future (and 2025) yield remains uncertain.
    • £34 million in one-off corporate tax receipts. These relate to banking sector tax adjustments from prior years. The Treasurer’s report is explicit: these are not expected to recur in future years.

    Together, those two items account for £73 million of the reported surplus. Without them, and without the unrealised investment gains, the position would look very different indeed. As tax expert Mike Williams has noted publicly, without Pillar 2, the structural deficit would have exceeded £100 million.2

    Despite a £106m Surplus, Cash Fell by £9 Million

    One of the most striking single facts in the accounts is this: despite the reported £106 million surplus, the States’ cash balances actually fell by £9 million during the year.

    How? Because £113 million was invested in infrastructure, assets and major projects during 2025 – capital spending on roads, water, power, ports and other long-term assets. The Group’s cash position moved from a net positive of £4.9 million at the start of the year to a net negative position of £4.4 million by year-end.

    This is a useful reminder that a surplus in the income statement does not automatically mean more cash in the bank.

    The Investment Portfolio: Good Returns, Below Target

    The States’ General Investment Portfolio, which was worth approximately £1.73 billion, delivered a return of 7.2% in 2025. That is a solid return by most measures, and it generated £118.9 million in unrealised gains that flow into the headline surplus figure.

    However, the portfolio’s target return is 8.5%, and its policy benchmark is 9.1%, so performance came in below both benchmarks. The portfolio also paid out £122.5 million during the year to fund capital investment and other commitments, keeping the overall value broadly flat year-on-year.

    The Pension Position Improved Significantly

    One piece of genuinely good news in the accounts is the pension position. The Group’s defined benefit pension liability of £44 million in 2024 has swung to a £6.1 million asset in 2025, a £50.1 million improvement. This is driven by changes in actuarial assumptions and investment performance, and it reduces a long-term financial risk that had been building for several years.

    The Bigger Picture: A Structural Problem That Has Not Gone Away

    The 2026 Budget, published before these accounts, already acknowledged a structural deficit of £77 million that will persist until fundamental tax reform is implemented. The 2025 accounts do not change that assessment, if anything, they illustrate exactly how fragile the revenue base is.

    Deputy Gavin St Pier, the former P&R Committee’s treasury lead, has previously pointed to a fundamental vulnerability: approximately 75% of Guernsey’s public revenues come from personal income tax and social security contributions from the working-age population. That is an unusually narrow base for a government of this scale, and one that is vulnerable to demographic change, economic slowdown, or any shift in the financial services sector.

    What About the GST Debate?

    Our previous blog post about GST highlights the complexities of GST, but even since then the landscape has shifted. These accounts create the real risk that any tax reform will again be kicked down the road by the States Assembly.

    The tax reform picture has shifted since the Budget. The GST-plus package of a 5% goods and services tax combined with income tax cuts to 15% had been the expected solution. However, as of late May 2026, Guernsey Press is reporting that four of the five senior P&R Committee members oppose GST-plus and the committee is now developing an alternative plan.

    The final proposals are expected in a policy letter on 8 June, with a States debate in July. Whatever the outcome, fundamental change to Guernsey’s tax system is now a matter of when, not if. The numbers in these accounts make that clear.

    What Does This Mean for You?

    For businesses and individuals in Guernsey, the 2025 accounts are a useful prompt to consider a few things:

    Tax change is coming. Whether it is GST, higher income tax, extended corporate tax rates, or some combination, the fiscal reality documented in these accounts makes reform inevitable (even if delayed). Planning ahead, understanding your personal and business exposure to likely scenarios, is worth doing now, before the States makes its decision in July.

    Corporate tax rates may change. The possibility of extending the 10% intermediate corporate income tax rate to GFSC-regulated professional services firms is still in play. If you run a regulated business, this could affect your tax position from 2027 or 2028.

    Capital investment is continuing. The States spent £113 million on infrastructure in 2025. That spending supports the local economy, but it also means ongoing capital requirements will keep pressure on the public finances regardless of what happens with the revenue side.

    The Pillar 2 income is not guaranteed. The £39 million recognised in 2025 will not be collected until mid-2027, and the long-term yield of this new tax on multinational profits is inherently uncertain. It should not be counted as stable, recurring income.

    Talk to me

    The next six months will be defining for Guernsey’s fiscal future. Whether you are a business owner thinking through the implications of tax reform, an individual planning your finances ahead of possible changes, or a regulated firm concerned about corporate tax rate changes, my Accounting firm Evans Bond can help you understand your position and plan accordingly.

    Visit our website for more info.

    Jon Bond is Founder and CEO of Evans Bond Limited, an accountancy and advisory practice in Guernsey, and principal of Melius Consulting Limited – a business consultancy. He is also a non-executive chairman of CI Co-op and NED at Sark Shipping. The views expressed here are his own.

    1. States of Guernsey Accounts 2026 ↩︎
    2. Guernsey Press 20th May 2026 ↩︎

  • The Island Economy in 2026: Five Signals I’m Watching

    The Island Economy in 2026: Five Signals I’m Watching

    Introduction

    Coming up to the halfway mark of 2026, and the Channel Islands economy continues to resist easy characterisation. The headline numbers look stable. The texture underneath is more interesting and, in some places, more concerning, than the broad brush suggests.

    I’ve been involved in leading financial services businesses in Guernsey for over 15 years, and sitting on the boards of CI Co-op and Sark Shipping gives me a vantage point that I think is worth sharing.

    These are not forecasts. They’re observations from someone paying close attention.

    Signal 1: Supply Chains are Fragile

    The narrative that post-pandemic supply chain disruption is “fixed” doesn’t hold up in a small island context. Lead times to the Channel Islands for specialist supplies remain longer and less predictable than they were in 2019.

    Businesses that have adapted — by carrying more stock, diversifying suppliers, or redesigning their service offerings are noticeably more resilient. Those who assumed a return to pre-2020 norms are still being caught out. The lesson here isn’t specific to islands. But islands make the lesson visible faster.

    Signal 2: The Talent Pipeline is Narrowing

    Finding mid-level professional talent in Guernsey has become materially harder in the past 18 months. This is partly demographic, a smaller cohort moving through the local pipeline, and partly the result of increased competition from remote-work opportunities that didn’t exist five years ago.

    The best people have more options. That’s good for them and requires genuine creative thinking from employers who want to attract and keep them. Retention strategies that worked in 2019 – stability, island lifestyle, modest salary premium, need updating.

    Signal 3: Consumer Behaviour has Shifted Permanently

    The “island premium” – the willingness of local consumers to pay more for local goods and services because of limited alternatives, is being eroded by e-commerce and changing expectations. This isn’t a crisis, but it is a structural shift. Businesses whose pricing assumed a captive local market should be modelling different scenarios.

    Signal 4: Digital Adoption is Uneven

    Some Guernsey businesses have accelerated their digital capability significantly over the past three years. Others have barely moved. The gap between these two groups is now visible in trading performance, client acquisition, and staff expectations.

    This is not primarily a technology problem. It’s a leadership problem. The businesses falling behind are almost always led by people who view digital investment as a cost rather than a capability.

    Signal 5: Community Institutions are the Overlooked Infrastructure

    Local charities and faith organisations don’t appear in economic forecasts. They should. These institutions provide social and operational infrastructure that a small island economy could not replace. Their resilience is a precondition for everything else.

    Business leaders who don’t engage with and support these organisations are, whether they know it or not, free-riding on a system they’re not contributing to.

    Conclusion

    None of these signals is cause for alarm. But together they describe an economy that needs proactive leadership from business owners, board members, and community institutions to navigate well.

    I’ll be writing about each of these in more detail over the coming months. If you have a perspective from your own sector, I’d genuinely like to hear from you.

    Jon Bond is Founder and CEO of Evans Bond Limited, an accountancy and advisory practice in Guernsey, and principal of Melius Consulting Limited – a business consultancy. He is also a non-executive chairman of CI Co-op and NED at Sark Shipping. The views expressed here are his own.

  • 2025: £16m deficit to £100m Surplus?

    2025: £16m deficit to £100m Surplus?

    The States of Guernsey are having a tough time not just managing the financial position of the island’s government, but even measuring it.

    The 2025 budget was set for a £16m loss after capital expenditure. This week, the Guernsey Press reported that 2025 would be published with a headline surplus of somewhere between £105m and £106m. Given the total income in the original 2025 budget was £687m, this swing of around 17% of projected revenue is substantial — and it deserves unpicking, because not all of it is what it first appears.

    So what has actually happened?

    Two windfalls, not one

    There are two distinct income surprises at work here, and they need to be treated separately.

    The first emerged back in February, when Deputy Gavin St Pier updated the States on the provisional 2025 figures. General revenue came in £57m above budget. The headline driver was banking income tax, which beat expectations by £37m. But St Pier was careful to flag that £23m of that £37m was exceptional – £11m came from a voluntary disclosure by a single bank that had calculated a seven-year underpayment, and another £12m was 2023 tax assessed and paid late. “It cannot be built into our baseline and relied on in future years,” he said. At that point the provisional surplus was around £36m, and the full-year audited result is due in June.

    The second surprise, announced more recently and not yet in the audited accounts, is an estimated £39m of accruals from Pillar II, the new OECD global minimum tax.

    These are different in character, and it matters that we treat them as such.

    What is Pillar II, and why does the timing matter?

    Pillar II is the OECD’s global agreement to ensure large multinational companies pay a minimum effective tax rate of 15% wherever they operate. Guernsey implemented it from January 2025, applying to multinational groups with annual revenues of €750m or more. Because Guernsey’s standard corporate tax rate is 0% for most companies, most in-scope entities would previously have paid nothing here. Pillar II captures the difference between what they paid and the 15% minimum.

    Originally, Guernsey expected Pillar II to raise around £10m a year. By the time the 2026 Budget was set in October 2025, that estimate had been revised sharply upward to £40–45m. The £39m accrual in the 2025 accounts reflects that revised expectation.

    But here’s the critical note: an accrual is not a cash receipt. The 2026 Budget documents confirm that Pillar II cash will not arrive until 2027. The States is booking income in its 2025 accounts based on a best estimate of what multinationals owe — income that hasn’t yet been collected, from companies that are, almost by definition, highly mobile. Tax expert Mike Williams made exactly this point at the recent public presentation, warning that without Pillar II income the island’s structural deficit would be over £100m rather than the estimated £77m.

    So the honest description of the £105m figure is roughly: £36m of actual surplus (itself partly built on one-off banking windfalls), plus £39m of accrued but uncollected Pillar II receipts, plus investment returns and other items. The audited accounts due in June will give us the precise final breakdown.

    The structural picture hasn’t changed

    The more important number is one that the surplus headline obscures entirely: Guernsey still has a structural deficit estimated at £77m.

    That figure represents the gap between what the States routinely spends and what it routinely earns, once you strip out the one-offs — the banking windfalls that won’t repeat, the Pillar II accruals that may or may not materialise in full, the investment returns that were strong in 2025 but lost £140m in 2022. The 2026 Budget, approved last November, projects a deficit of £48m before investment returns even with the new Pillar II receipts baked in.

    Deputy St Pier put it plainly: “Having such a high dependency on whether banks have a good or bad year is neither sensible nor sustainable.” With only 21 licensed banks in Guernsey, a handful of individual institutions can move the States’ income by tens of millions in either direction, year to year. That’s not a tax system – it’s a lottery.

    What the surplus doesn’t tell you about spending

    Buried in the provisional figures is a number that deserves more attention than it gets: pay costs for 2025 totalled £351m.

    That’s up from £318m in 2024, a 10.4% increase in a single year, in a year when Guernsey RPI was running at around 3.4%. The States’ own presentation noted that over 300 vacancies existed on average throughout the year, around 6% of the total workforce, most of which were covered by overtime or agency staff, both of which cost more than permanent employees.

    Health and Social Care overspent its budget again, by £3.3m. Corporate Services overspent by £2.6m, largely from costs associated with the exit from the Agilisys IT contract. The same two areas, the same story, as in 2023 and 2024.

    The pay bill has now grown from approximately £130m in 2006 to £351m in 2025 — a 170% increase over nineteen years, against cumulative inflation of roughly 85% over the same period. The workforce has grown by approximately 1,400 people.

    A good year that changes nothing

    That’s the honest assessment. 2025 will be reported as a surplus, and there’s genuine good news in there — document duty receipts were strong at £27m versus a £16m budget, driven by a 27% rise in local market property transactions. Employment tax receipts beat budget by around £7m. These are real signals of economic activity.

    But the swing from a budgeted £16m deficit to a reported £100m+ surplus is almost entirely explained by factors the States cannot control or reliably repeat: a banking sector that had an exceptional year, a single bank paying seven years of underpaid tax at once, and an accounting accrual for new international tax revenue that won’t arrive as cash for another two years.

    The 2026 Budget acknowledged this directly, noting that the States continues to operate a structural deficit that will not be resolved until tax reforms are implemented. Those reforms, whether GST-plus, corporate tax changes, or some combination, remain undecided, with a States debate expected in July.

    A one-year surplus built on windfalls is not the same as a sustainable public finance position. The States knows this. The question is whether the rest of us understand it too.

    Jon Bond is a non-executive director of the Channel Islands Co-operative Society and a director of Sark Shipping. He runs Evans Bond, an accounting and advisory firm based in Guernsey and is principal of Melius Consulting Limited. He writes at jonbond.biz.
    The views expressed here are his own.

    Sources: States of Guernsey Budget 2025; Guernsey Press, 20 May 2026; The Quarry, 25 February 2026; BBC Guernsey; States of Guernsey Budget 2026; gov.gg/pillar-two; P&R Committee update, June 2025. Audited 2025 accounts due 2 June 2026.