The Department of Economic Development has issued the following response to the Budget.
The Minister for Economic Development John Shimmin MHK is confident that his department will help drive further economic growth and job creation following the Treasury Minister’s Budget speech earlier this week.
The department’s budget has been maintained, although at first glance it appears to have been reduced when comparing with last year’s budget. This is because some activities have been transferred (notably Information Systems Division transferred to the Cabinet Office) and also income projections for the Ship and Aircraft Registries have been increased due to their continued growth.
The Minister said: ‘The Isle of Man continues to perform well in what remains a challenging global economy. Last year the government forecast that our economy would grow by 3 to 4% in 2013/14 and the evidence to date indicates that this will be achieved.
‘We now expect we will maintain this level of growth in 2014/15 which would mean that the Island’s economy will have grown for 32 years in succession.
‘The economic growth we have experienced was stronger in some export-oriented sectors than in the domestic economy where the Retail and Construction sectors are still experiencing difficulties.
‘Sectors such as e-Business, high-tech manufacturing and some parts of financial services, such as the international life insurance sector, performed particularly well.
‘I also support the Treasury Minister’s comments regarding the importance of High Net Worth Individuals to the Isle of Man. He highlighted that at least 360 jobs have been created by high net worth individuals [very rich people] relocating to the Isle of Man. My department’s research undertaken as part of the Vision2020 work estimated that around 1000 jobs have been created both directly and indirectly due to attracting such individuals. This is consistent with the evidence that for every new job in a wealth-creating sector there are at least 2 other jobs created in supporting sectors. Therefore it will be vital for Government to keep supporting the relocation of these individuals and to provide an environment that is supportive, entrepreneurial and which enables them to flourish such that they in turn can generate the jobs and taxes that will enable our community to continue to prosper.
‘While the UK remains the key target country for the economy, a rapidly growing proportion of business is coming from newer markets, particularly the Middle East and Asia.
‘I am conscious that during 2013 there were several announcements about businesses closing or reducing staff numbers and these tend to attract more coverage than the creation of new businesses and jobs. I am pleased to confirm that the total number of people in employment rose slightly in 2013.
‘This is evidence that the island’s economy is continuing to evolve. Given this, it is vital that all in our community understand how it is changing, which sectors and careers offer the greatest potential for the future and how all in our community can work together to fulfil this.
‘My department is leading the promotion of ‘Vision2020’, the joint public/private sector strategy which maps out the potential from key sectors to create a clear economic vision for the Isle of Man.
‘An excellent example of this collaborative approach is the development of the dedicated engineering training centre of excellence at Hills Meadow. The department has worked directly with the Department of Education and Children, the Isle of Man Chamber of Commerce and with manufacturing industry to enable this vital initiative to be developed.
‘Vision 2020 forecasts that our economy can grow by 3 to 4% every year to 2020, with the e-Business sector being a key source of growth.
‘This growth will generate substantial additional Government income, which will be instrumental in funding public services and helping to maintain our low levels of taxation for all.
The department issued updates on the sectors it is involved with.
Support for High Net Worth Individuals
The department recognises the significant economic contribution that High Net Worth Individuals make to the Isle of Man and acknowledges the Treasury’s figures of 360 new jobs being created by High Net Worth Individuals (HNWI) relocating to the Isle of Man.
In support of that, the work done as part of the Vision 2020 research estimates that around 1000 jobs have been created both directly and indirectly due to these successful relocations, given that for every new job in a ‘wealth-creating sector’ there are at least 2 other jobs created in supporting sectors.
A high level of new planning application approvals relating to new housing for high net worth individuals has provided the local construction sector with £30m of new business.
In recognition of the importance of HNWI to the economy the Department offers a highly tailored service for those HNWI considering relocation to the Isle of Man and it has a strong track record in this area.
Qualifying clients are assigned a dedicated dusiness development manager who acts as a single point of contact for all personal and business relocation matters concerning the Isle of Man Government.
Financial and Professional Services
The department has been working very hard to support financial and professional services, which remains the island’s principal source of jobs, GDP and taxes. Overall, financial and professional services continued to grow in 2013 and further growth is predicted in 2014.
The international life insurance and professional services sectors continue to perform well. At the same time, some areas have reduced in terms of employment over the last year, notably banking and fiduciary sectors. These changes are being driven principally by global economic forces, not factors unique to the island. Indeed, the island is faring better than many of our competitors.
The department continues to work hard with the Chief Secretary’s Office to promote the island’s interests internationally and 2013 saw the UK Prime Minister David Cameron publicly acknowledge that the Isle of Man is not a tax haven.
The department has also been working particularly hard with the banking sector, the Channel Islands and the UK Treasury in order to protect our interests as the UK plans its new banking regime to split retail and investment banking in line with the Independent Commission on Banking. Announcements on how this will affect the Isle of Man are expected in the next few months.
2014 will also be an important year in terms of automatic exchange of information, with FATCA and related work being implemented in concert with the local industry.
The Department of Economic Development is promoting the Isle of Man in key international markets as identified in partnership with the private sector as part of the Country Strategy, with China, the Middle East and India being key at present.
The aircraft and ship registers are forecast to continue to grow and so aid further economic growth. The Isle of Man’s registries continue to provide world class service to their growing global client base and help to generate substantial revenues for our financial and professional services businesses.
In 2013 the Ship Registry grew at twice the rate of the world’s fleet - a performance which has elevated the Isle of Man to 14th place (Jan 2014 figure) in the table of global shipping registers by tonnage with 40% of the fleet Asian-owned. Just three years ago, the Isle of Man did not even feature among the world’s top 20 registries.
The Aircraft Registry is widely acknowledged across the business aviation industry as the best registry in the world to deal with. The number of high quality business jets on the register continues to grow rapidly and it is now firmly established in the top 10 registries in the world by numbers of business aircraft on its register, ahead of countries such as France.
The Isle of Man Companies Registry quality management system has been certified as complying with the requirements of ISO 9001:2008 following a review by Lloyd’s Register Quality Assurance.
The department is continuing to invest in its registries to maintain their high standards of customer service. For example it is supporting the development of new IT systems in the Aircraft and Companies Registry to enable more online services for clients.
E-Business, which incorporates e-Gaming, is the fastest growing part of economy. It continues to grow at over 10% a year and accounts for around 14% of National Income and 1,500 jobs. The research performed to support the development of Vision2020 identified e-Business as offering the greatest potential to create new jobs, spend in the local economy and Government income.
The recent ICE Totally Gaming event in London has attracted a further string interest from a wide range of companies looking to relocate to the Isle of Man including software houses and game designers.
To achieve this potential, the department is working closely with the private sector. Two key areas of focus will be skills development to provide the skilled workers required and international marketing to help local businesses win new revenues and to attract further new businesses to the island.
The Manx Educational Foundation’s intention to buy the Nunnery to establish a private ICT and business education and training centre offers great potential to aid e-Business growth; we should have a much clearer view of this initiative in the next few months.
In addition, we have launched a new initiative with the private sector to review the school curriculum so that our young people can gain the ICT skills they will need to flourish in future.
In terms of marketing, Government has recently committed an additional £350,000 over the next 2 years via the Marketing Initiatives Fund to promote e-Business, both helping local businesses to grow as well as attracting new investors.
The department has responsibility for leading energy policy and in May 2013 Tynwald agreed that the Isle of Man Government would explore opportunities to develop potential offshore energy production in Isle of Man territorial seas for export to neighbouring jurisdictions. This could both assist with the provision of renewable energy while also generate a substantial income for Government to help fund public services.
There is a significant opportunity for the Isle of Man to lease parts of its seabed for the generation of renewable energy to assist the United Kingdom to meet its national and European renewable energy targets for 2020. The department conservatively estimates that the installation of one typically sized wind farm alone in the Isle of Man’s territorial seas could bring in £5m per year.
All the infrastructure costs involved in building and installing the wind farms would be borne by the developer, not the Isle of Man Government.
A consultant with expertise in tendering for offshore renewable energy projects has recently been appointed to assist the Department and its partners across Government realise these opportunities from wind and tidal sources.
Offshore wind farms also offer other economic development potential for the Isle of Man. These offshore installations will require onshore facilities to meet the operation and maintenance of the turbines so the Department is estimating the creation of around 60 jobs if just one wind farm is progressed.
The island’s manufacturing sector has continued to grow, driven by the high-tech manufacturing sub-sector which primarily serves the aerospace and oil and gas industries.
The sector is projected to continue to generate over 80 additional jobs every year for the foreseeable future. This is helping create significant local demand for the skilled engineers needed.
The Department has therefore welcomed the announcement that funding of nearly £1m for the Department of Education and Children has been approved to turn the Hills Meadow Training Centre into a dedicated engineering training centre of excellence.
In 2013 government and the private sector modernised the 2-year engineering apprenticeship programme and increased student numbers from 12 to 18. This will double to 36 from September 2014. Participants completing this programme will have excellent job opportunities.
Visitor Economy and Motorsport
The Visitor Economy [tourism] maintained a similar level of performance in 2013 compared with the previous year when we saw good growth in terms of both leisure visitor numbers and visitor spend.
Long standing events proved as popular as ever for visitors and new events such as Pokerstars’ Isle of Man UKIPT event attracted well over 1000 bed nights and brought the island to the attention of a brand new audience.
The principal success in 2013 was the inaugural Isle of Man Festival of Motorcycling, incorporating the new Classic TT. The new format definitely attracted many more visitors, showing such long-standing events can still deliver growth.
Comparative research performed in 2013 and 2009 revealed an overall increase in visitors to 13,407 for the new Festival, compared to 8915 for the same period in 2009. The study showed that these visitors spent a total of £8.4M compared with £4.9M in 2009 and that this contributed £1M to the Exchequer.
The TT Races are now viewed by a global television audience of 25 million people and during 2014 the Department of Economic Development will be exploring how the TT Festival and Festival of Motorcycling can be enhanced to offer even greater benefits for the Isle of Man.
Research conducted in the UK shows that the TT remains the thing the Island is best known for, so it remains a vital part of the Island’s proposition for visitors and increasingly for the broader economy.
The department continues to successfully raise the profile of the Isle of Man especially in regard to the niche markets it is targeting such as outdoor pursuits, adventure sports and in new areas such as stargazing. A dedicated public relations campaign in these areas saw the Isle of Man featured in every major national newspaper during 2013 as well as by UK and international broadcasters.
Domestic economy: Retail and Construction
Conditions in the domestic economy remained tough in 2013. That said, both Treasury data and industry leaders indicate the retail sector returned to growth in 2013 as consumer confidence has improved.
Construction levels remained depressed in 2013 for the 5th year in a row, but there was a high level of new Planning application approvals (including for new housing for High Net Worth Individuals totalling around £30m) such that the construction sector is expected to grow in 2014.