John Coyle, chief executive
officer of Standard Bank Isle of Man Limited, offers
Business News readers a look back over the last year
YOU could have been forgiven 12 months ago, for hoping that the worst of the world’s economic and financial woes were behind us, and that 2011 would usher in a gradual return to more stable global trading conditions.
Alas, if anything, conditions have oscillated between ‘bad’ and ‘worse’ for much of the year, leaving me at least to conclude that, for the time being, volatility and uncertainty are now staple features within ‘the new normal’ business environment.
Despite the generally robust performance of the Isle of Man economy this year, unfortunately we are not immune to global trends and consequently 2011 saw a downgrading of our sovereign credit rating by S&P to AA+ from AAA. The reality is however that this revised rating represents probably only a dent to national pride rather than having any specific financial implications, given the island’s thankful avoidance of public sector borrowing.
The UK of course has a much larger reliance on public sector borrowing and has made no secret of its own budget challenges. No surprise to some therefore, that it came back for a second bite of the cherry known as the Common Purse Agreement in July this year, this time looking to relieve the Isle of Man Government of a further £75 million of annual VAT revenue. Up to that point, it felt like we could adjust our fiscal position without any distinctly noticeable effect on public services, but I suspect this latest revision will make that a much more difficult challenge.
Not only have we attracted the attention of the UK this year on tax matters, but our friends in Europe have also been running the slide rule over our tax strategy – in particular the ‘zero-ten’ regime. It was particularly good news in September that following changes to the Attribution Regime for Individuals, our taxation arrangements are now felt to pass muster among the EU Code of Conduct Group, leaving our economy free to fight another day. It was also somewhat ironic to hear President Sarkozy of France, a country which has little enthusiasm for low tax jurisdictions, confirm to the recent G20 conference that the Isle of Man is in the vanguard of tax transparency – indeed one of only eight countries to be awarded the highest rating for co-operation on information exchange – and, no, the UK was not amongst the others!
A good example of the Island’s enlightened approach to tax transparency has been the introduction of Exchange of Information with the countries of the EU, in respect to interest earned on individuals’ bank accounts. This required considerable effort on the part of the island’s banks in order to amend their IT systems and carry out a large scale client communication programme, but in the round, this seems to have passed off very smoothly and successfully.
The key event on the political scene this year of course, has been the formation of the new Government under Chief Minister Allan Bell. Interestingly, despite the scale of the challenges facing the nation, relatively few individuals felt they could do a better job than the incumbent politicians and therefore as a result there were only seven new faces in the Keys. Certainly Mr Bell’s idea of a Government of National Unity is laudable and exactly what is needed in this time of economic uncertainty.
As has been the case in the past, it is in times of adversity that the island always pulls together for the sake of the common good.
Mr Bell has also been a consistent advocate for the need for Government to focus on generating new revenues and not just constrain spending.
To this end, we have seen a number of initiatives launched to assist this objective during the year. For those of us connected to the finance industry, the most significant has been the formation of the new Isle of Man Finance Partnership, combining the skills of public and private sectors alike under the leadership of Mike Hennessy, CEO of the Chamber of Commerce.
It hasn’t been all doom and gloom by any stretch this year – we can and should all be proud of the Manx Missile Mark Cavendish, who became the world champion road race cyclist in September this year, and the Commonwealth Youth Games were a great success.
By all accounts I was the only person in the island who wasn’t quick enough to snap up tickets online for Elton John’s first ever concert here in June – good job I could still hear it from the garden! The world also gained an insight into Manx cuisine in November, with Channel 4’s Come Dine With Me featuring a colourful collection of chefs and their culinary concoctions.
So if that was 2011, then what might 2012 have in store? Well, it doesn’t look like there will be any fundamental improvement in the economic outlook in the near term, with a number of commentators forecasting either a double dip recession, the demise of the euro, or both. For our part, I think the Island’s response needs to be one of doing what we do best – collaboration across public and private sectors for mutual benefit, remaining fleet of foot when considering new opportunities and continuing our efforts to develop our own international personality, particularly aiming to forge new trade links as a fiscally responsible jurisdiction – and, oh yes – can someone please book Elton to come back for another gig in the park?