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(CNS): Government revenue from the financial services sector, both direct and indirect, now makes up almost two-thirds of public revenue, having increased by 38% over the last five years, according to a report commissioned by Cayman Finance. However, the research that this revenue could be even higher if a focused package of reforms was rolled out to support the industry.

Without reforms, costly work permits and high living expenses could drive business in the industry to outsource more jobs, since parts of the sector are becoming ‘jurisdiction neutral’. This puts Cayman at risk of becoming a jobless revenue centre, which would lead to a decline in government revenue.

The report by Capital Economics also point to the “burdensome regulatory requirements”, which were cited as the most significant issue affecting their outlook by most of the Cayman-based firms that took part in the surveys that helped shape the report.

Friction or delays in government services as well as the lack of availability of skilled talent were also seen as barriers to growth. However, the report found that with continuous improvements to the Cayman Islands’ regulatory framework, increases in government funding and productive investments in new technologies, the financial services industry here will thrive.

“Streamlined compliance coupled with progressive immigration policies attracts global talent, while investment in local talent sees more Caymanians enter the sector, solidifying the Cayman Islands as the jurisdiction of choice for complex, high-value financial structures,” the analysts stated, adding that industry growth would offset any GDP per capita decline and support growing government revenue.

The report found that the right support, innovation in regulation and government services, increased investment in promotion and better access to talent could unlock 40% growth in the financial services industry over the next decade. In the best case scenario, government revenues could increase by CI$60 million over the next ten years, as around 2,000 jobs were added to the employment market.

Alexandra Dreisin, an economist at Capital Economics and one of the authors of the report, said the modelling shows that a targeted package of practical reforms could lift financial services growth from 1.8% to 3% annually over the next decade.

“That difference compounds to roughly CI$425 million more output by 2035, alongside additional jobs for Caymanians and around CI$60 million in extra government revenue,” she said. “Importantly, these gains come from doing existing things better, streamlining regulation, digitising key public services, investing in promotion, and improving access to critical skills, while maintaining Cayman’s strong international standards.”

The report forecasts significant benefits to the Cayman economy based on improvements in four areas. The first is regulatory innovation. Cayman’s high international standards should be maintained, while applying a proportionate, risk-based approach, with clearer guidance and pragmatic supervision, so that firms can comply more easily and regulators can focus resources where they matter most.

The second area is enhanced digital infrastructure for government services. The report proposes accelerating the digitisation and automation across registries and regulatory systems. Faster, more predictable service would improve the client experience, free up capacity in government, and reduce costs and uncertainty for businesses.

The third area where there should be improvements is investment in promotion. The report found that scaling up the promotion of Cayman’s financial services sector to levels comparable with rival offshore finance centres would enable firms to sustain business development, deepen relationships with global investors and intermediaries, and ensure Cayman’s strengths remain front-of-mind in competitive mandates.

The fourth area is the development of Caymanian talent, alongside faster and more efficient immigration processing for highly specialised professionals not available locally. The report suggests there should be improved public-private collaboration on scholarship programmes, apprenticeships and career pathways for Caymanians.

It also recommends streamlining and digitising the work permit application process and offering greater residency certainty for critical roles.

Cayman Finance CEO Steve McIntosh said the financial industry is the backbone of the economy and public finances. “These findings make a compelling case that investment in the right areas can unlock huge opportunities for the country. Our vision is a financial services industry that is thriving and supporting the community to its full potential. We look forward to working with Premier Ebanks and his government to achieve it.”

His comments were echoed by Cayman Finance Board Chair Conor O’Dea, who said the financial services industry had always thrived when government and industry work together.

“This report shows that with the right reforms — modern regulation, investment in technology, efficient government services and access to skilled talent — we can secure another decade of growth. By potentially adding up to CI$60 million to government revenues by 2035, these improvements represent a win for everyone. This is a moment to double down on our partnership and ensure Cayman remains a world leader in financial services,” he added.

See the full report below or in the CNS Library.