Yesterday was the Chamber of Commerce Quarterly Luncheon at the Marriot Hotel on Seven Mile Beach. The guest speaker was Craig Wright, Chief Economist at the Royal Bank of Canada. Wright delivered a pitch-perfect speech for around 20 minutes summarising the factors leading to, and hopefully from, the global financial crisis and subsequent recession, barely pausing for breath and with nary a note on the podium. If I were Joe 90, this guy would be right at the top of my kidnap list.

Global financial crisis/recession outlook

His comments on the global economy were no surprise to any regular reader of The Economist. *** SPOILER ALERT*** All the G7 economies have all managed to pull themselves back into positive growth with the exception of one laggard: the UK, which is expected to join them in Q4 2009. The recovery will be slow and US-led.

What is the outlook for Cayman?

Although the congregation maintained a respectful hush throughout his speech, even the forks stopped clanking when Wright reached his forecast for the Cayman Islands specifically. A couple of points were noteworthy.

1. First, the G7 countries, facing unprecedented budget deficits, will be scratching around for every last penny of potential tax revenue. With a top marginal rate of income tax of 61% in the UK, any company with a nebulous or portable product or service (i.e. financial services and e-commerce) is likely to give at least some thought to offshoring at least some of their operation.
   
   
2. Second, the popular backlash against the financial services industry is likely to manifest in tighter and farther-reaching regulations on all kinds of financial products, services, companies and practices. Again, this represents an opportunity for offshore financial centres to capitalise. To back this up, The Economist recently eviscerated an effort by the European Union to introduce restrictions on the pay of Hedge Fund and Private Equity Managers (via an addendum to the Alternative Investment Fund Management directive). The proposed directive would discourage risk-taking (in Hedge Funds? Really?) and mandate that up to 60% of managers’ pay be earned on a deferred basis.
   
   

So the question is, how much sand do you need to have kicked in your face before you fold up your deck chair and get off the beach?