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Job losses

Bermuda received a double hit this week with news that Willowbank will be closing indefinitely and that hedge fund administrator Citi Hedge Funds Services will be shedding 100 jobs.

It’s not hard to figure out why.

Willowbank is just the latest hotel property to close its doors. Always among the more unusual Bermuda properties, it seemed to have a loyal following, but it would seem that the expense of running a Bermuda hotel property became too much for the trustees.

Indeed, chairman Fernance Perry indicated as much when he said, in effect, that it had been kept open this long for the sake of the staff.

Bermuda hotels struggle to compete on a worldwide basis because of the expense of operating on the Island. Until costs come down, expect more closures. It is worth noting that this closure is coming now, towards the end of the tourism season. Clearly whatever was earned in the last six months was inadequate to keep the property going in the next six months.

It is likely that a similar reasoning took place with Citi, although in its case, the jobs are being relocated.

A spokeswoman for the banking giant said: “After due consideration, Citi has decided to relocate some of its functions currently being performed out of its Bermuda office to its Center of Excellence sites in North America.

“This effort is being undertaken to consolidate Citi’s support functions, reduce overall expenses and create operating efficiencies.”

There is no doubt that the expense of doing business in Bermuda has contributed to its decision.

Every business in the world is looking to control costs as best it can. Bermuda has to recognise that it cannot demand top dollar and assume that companies will accept it. This is true for government and for private sector service providers.

The question that has to be asked is how many more job losses can Bermuda sustain? The Island is now in a spiral in which every set of job losses causes further reductions in economic activity, and thus more job losses.

Both Willowbank and Citi are, in their own ways, foreign exchange earners. So there is a direct loss to the economy when they close. Less foreign exchange means that there is less money in the economy to buy everything from food to computers to automobiles.

The spin-off is that other companies will lose service contracts and the like, while Government will lose substantial revenue. This will ripple through the whole economy, causing more contractions and job losses as it does so.

Bermuda has to reverse this spiral and can only do so by reducing the cost of doing business and by getting out and promoting Bermuda as an international business and tourism centre.

But this will only happen if Bermuda can be more nimble and more flexible in how it does business. This has to include reducing the cost of doing business and putting a moratorium on six-year term limits.

Quite simply, Bermuda has to show it is open for business and wants to do business with the rest of the world.

It is not an exaggeration to say that the Island is on an economic precipice and it will take very little for the current contraction to turn into collapse unless real action is taken.

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Published September 30, 2011 at 2:00 am (Updated September 30, 2011 at 10:17 am)

Job losses

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