The Manx economy shrunk for the first time in 32 years in 2015-16, newly-released government accounts shows.

National income fell from £4.51bn to £4.45bn, a drop of 1.5% (0.9% in real terms).

And surprisingly, e-Gaming, despite representing 17% of the Manx economy and contributing more than £730m in gross domestic product, was one of the main reasons for the decline during the year, reducing in size by 12.6% in real terms.

The island has prided itself on having had decades of unbroken economic growth.

Adam Smith, head of the economic affairs unit, said there had been no indication at the time that the economy was shrinking in 2015-16 - but there are signs from improving figures for personal income that we may get back into growth again.

There is a lag in publishing figures for national income as they are compiled after individual and company income tax returns are finalised.

Mr Smith said the introduction on a point of consumption tax from profits generated in the UK had hit that e-gaming sector. The sector was also having to pay additional licence fees to trade in other countries. But he added: ’From their profits and turnover they are still skyrocketing.’

Transport and communication was another big contributor to the drop in gross domestic product, with a fall of 26.9% in real terms.

This is being attributed to the sale of vessels on the Manx Shipping Register by some shipping companies.

But there are signs of improvement.

Importantly, personal income increased in real terms for the third year in a row after a few years of decline, meaning that, on average, people are starting to have more money in their pockets, the report by the Cabinet Office’s Economic Affairs unit shows.

Minister for Policy and Reform Chris Thomas MHK said the economy is still buoyant. He said: ’Personal income is the figure that matters most to nearly all of us, because it most directly affects our lives.

’With more money, people can spend with more confidence, benefiting our businesses and our community.’

He added: ’Sectors where national income grew include banking and insurance, which is good news for the thousands of people who are employed in these sectors locally.

’More recent indicators, such as increasing levels of employment, a turnaround in population and improved income tax receipts, demonstrate strength in our economy and are positive indicators for the future.’

GDP is the value of goods and services produced locally and a measure of personal and corporate income derived from economic activity on the Island. Gross national income (GNI) fell by 4% (3.4% in real terms).