So lovely to Doing Business in come home to Businessman Eddie Davies gives an insight into what makes life on the island ISLE OF MAN so good FINANCIAL TIMES SPECIAL REPORT | Tuesday May 17 2011 Page 2

www.ft.com/isle­of­man­2011 | twitter.com/ftreports Diverse Challenge is to win global trade industries The territory has are key to managed to avoid recession and hopes the future are now pinned on the pace of recovery Economy quickening, writes Andrew Bounds Andrew Bounds gives an overview of t is a typical Manx scene: a quiet country churchyard the island’s prospects with a Celtic cross in the foreground; then there is a Iroar and a blur as several With growth of 4 to 5 per cent motorbikes scream past at and unemployment below 2 per almost 200mph. cent, the Manx economy is the This is the trailer for the Isle envy of many in Europe. But a of Man’s latest hit film, TT3D: small, internationally open Closer to the Edge, but it could island learns to prepare for equally be a metaphor for the instability. white-knuckle ride the small “We have always had a island has taken through during diverse economy, more so than the global financial crisis. our competitors. The fact that The film, financed partly by the Isle of Man has not gone the government, tells the story into recession is down to that,” of Guy Martin, an ordinary says Allan Bell, minister for eco- man, who is striving against the nomic development. odds to win the TT, the world’s But he says that process of most dangerous race. diversification must get ever The island of just 80,000 peo- quicker, as the financial sector, ple has also taken on a big chal- which still accounts for almost lenge: that of prospering in a half of gross domestic product, globalised world. Its progress struggles to recover from the has slowed but not stalled – recession. unlike most of Europe, it The offshore haven has long avoided recession. had an advanced manufacturing Tony Brown, chief minister, sector, accounting for 4.6 per says: “As for most of the west, cent of its £3.2bn GDP. This has the past 25 years have been also diversified: into filmmak- good for everyone. For the Isle ing, space, registering aircraft of Man it has been very good. and ships, and other niches. We have gone from 50 per cent Mr Bell’s new “superministry” of the UK’s gross domestic prod- has brought all the business- uct to par or a little above.” facing and revenue earning He adds: “The Isle of Man is arms of government under one going through a difficult time. roof. It has pooled the various People have less money in their sectoral support measures for pockets. But they are still in business into a single scheme, jobs and there are still a lot of making it easier for companies business people looking to to apply and for the government invest in the Isle of Man.” to administer. The island has an ancient par- Mr Bell says financial services liament, the Tynwald, and its will remain important, but the tight-knit, consensual political old role of banks taking deposits system has been able to react mainly for expats and tax exiles quickly to economic changes. and recycling them into the City When the UK government froze of London needs to change as the assets of Kaupthing, the Ice- Wider view: Douglas Bay. The island must continue to adapt to a world where wealth is shifting to Asia, according to John Coyle, president of the Isle of Man Bankers’ Association wealth moves eastward. landic bank, including deposits “We recognise that in many held through its Isle of Man ment does have are being “code of conduct”, as it applied a space station is based on the money laundering, illegal gam- ways the old banking model branch, in 2008, the island used focused on its marketing and only to shareholders who live island – aircraft and ship regis- bling and bank fraud was a jolt, that the Isle of Man has devel- its reserves to guarantee those business promotion efforts via a on the islands. tries, and online gaming. but the business retains its oped over the past 25 years is held there and restore confi- new superministry of economic “We want to be seen as good “The Isle of Man was recently licence. Mr Bell, who is also near the peak of its cycle,” he dence. development. neighbours and reputable prac- ranked the fifth most likely responsible for the sector, says says. “Some time ago we A year later Westminster Allan Bell, the previous treas- titioners when it comes to inter- country to land on the moon he has no evidence the company embarked on a new strategy rewrote the “common purse” Inside this issue ury minister, has taken the national standards,” says Ms after the US, Russia, China and has broken any laws, and says it with the banking industry to agreement that dictates how Financial services reins and promises a “sharper Craine. India,” says Tim Craine, head of is a “reputable business”. He find out what the future of revenues from value added tax The sector has its sights on focus”. Not before time, say She remains committed to a space at the business develop- does not believe the island will banking might be in the next are shared. That cut govern- Asian and Middle Eastern some. zero tax rate on all companies ment department (and no rela- suffer reputational damage as a five to 10 years.” The report is ment revenues by about £140m a business Page 2 “People still confuse the Isle except the banks, which pay 10 tion of the treasury minister). result of this decision. expected in the autumn. year. of Man and the Isle of Wight,” per cent. The so-called “zero/10 The island’s high position in the Under Isle of Man law, gaming One challenge is that banks However, the UK’s decision to Healthy pragmatism says Seamus Nugent, chief exec- regime” ensures overseas gov- list of lunar hopefuls is thanks companies must keep custom- pay 10 per cent tax on profits, increase VAT from 17.5 per cent You can expect the island utive of Dandara, one of the big- ernments do not tax Manx- to the Odyssey Moon team, ers’ money in ringfenced making up a significant chunk to 20 per cent from January has to shout about its gest building companies on the registered companies. which is competing for the £30m accounts so it can be returned. of the island’s revenue. added about £26m to revenues, attractions in future Page 2 island. “We don’t market our- Andrew Corlett, a senior part- Google X Lunar prize, aiming to Mr Bell says the US accounted GDP grew 4.7 per cent in says Anne Craine, the treasury selves well enough. It is one of ner at Cains, an island law firm, devise a lander capable of send- for only about 20 per cent of 2008-09, the latest figures availa- minister. Steaming ahead the best offshore financial juris- says it is important to keep on ing back pictures from the sur- PokerStars’ revenues and cus- ble. The economic growth rate Taxes have risen but remain A commitment to research dictions in the world.” side with London. “We are not a face of the moon. tomers are getting their money is expected to be 4 or 5 per cent low, with a top income tax rate has made one company a The island must continue to hub ourselves, but a spoke of But gaming offers something back. The US Congress banned in 2010-11, having slipped to of 20 per cent. There is no tax world leader Page 2 adapt to a world where wealth the UK,” says Mr Corlett. If the electronic gambling transac- about half that the year on earnings above £115,000. But is shifting to Asia, says John island needs to compromise to tions in 2006. PokerStars before, according to treasury many perks, such as mortgage Racing Coyle, president of the Bankers’ maintain its link with the City, ‘The patient is stable, declined to comment. estimates. interest tax relief and govern- certainty Association, who is helping then it should, he says. Mr Kimber says the gaming Banking still accounted for The island the international ment-paid tuition fees for Manx is becoming draw up a new banking strat- As a Crown dependency, the financial centre sector is in good health. He 15.6 per cent of the economy, students at UK universities, are a centre of egy. “The patient is stable,” he island governs itself but is rep- points to Paddy Power, the Irish with insurance and other finan- being squeezed. green says. Now, “the international resented in many international needs to move to bookmaker, which is building cial services accounting for a The government is constitu- technology, financial centre needs to move forums by the UK, with the up its presence on the island, further 22.4 per cent. tionally obliged to run a surplus even for TT to the next stage of evolution.” Queen as sovereign. the next stage of and says the aim is to bring in The fastest-growing sector and is using £114m of its £300m motorcycles Attacks on tax havens in Mr Brown says the two have its evolution’ support companies as well as was information technology, reserves to slow the speed of Page 3 Europe and the US have dimin- had some “spats” but the rela- straight gaming companies. which grew 66.9 per cent in cuts over the next five years. It ished of late, but the island tionship is healthy. One such is Microgaming, a 2008-09 to hit 10 per cent of GDP. retains a triple AAA credit Professional services remains committed to reforms Ms Craine believes that more down to earth: money and provider of casino and online It reflects the growth of the rating from Moody’s and Firms are looking to expand to ensure it remains on white growth can return to the 6-8 per jobs in the short term. gaming software. It established online gaming industry. Standard & Poor’s. into overseas markets lists operated by the European cent levels that preceded the Garth Kimber, the head of its base on the island in 2001 Tourism also remains a key Nevertheless, Mr Brown has Page 4 Union, the International Mone- financial crisis, though she e-gaming development, says the and employs 80 people. source of income and jobs, set a goal of 10 per cent cuts tary Fund and the Organisation admits the territory is not industry employs 650 people and Roger Raatgever, chief execu- accounting for 5 per cent of across government. Some £26m Bountiful isle Industries for Economic Co-operation and exempt from the pressures of its taxes and licensing revenues tive of Microgaming, believes GDP. The offer is improving all of the £30m annual saving abound but all depend on Development. the outside world. She expects contribute about £15m annually the industry has a bright future the time, with considerable pub- targeted has been made, and the exports Page 4 In July 2011, it will begin an 4-5 per cent growth for 2010-11. to government coffers. on the island. He says the gov- lic and private investment. 8,000 state employees have been automatic exchange of tax infor- Few would bet against the Licensees pay £35,000 plus 1.5 ernment is always eager to help The number of visits to the reduced by 485. The bet’s mation, ahead of other centres. Manx ability to adapt yet again. per cent on the first £20m of companies, and adds there is a island by non-residents rose on Online He says: “I have been in gov- gaming is Along with Jersey, it is with- Mr Bell says: “We have come gross gaming yield annually. trump card. from 275,203 to 287,124, an ernment since 1981 and in all one area drawing up anti-avoidance rules through worse. As we have The government has granted 25 He says: “Aside from the obvi- increase of 4.3 per cent, in 2010. my time until last year we were that is seen intended to ensure that business proved in the past, we can move licences, with another five in ous tax benefits, the Isle of Man A quarter of visitors went on only ever expanding the public as ripe for owners are regularly paid taxa- quite quickly into new niches as the pipeline. also offers employees a fantastic business. The government is sector. This is the first time we growth ble dividends instead of letting they present themselves.” The decision by the US in quality of life. We always say also proposing to try to attract have reduced it. It is quite an Page 4 the income accumulate tax-free Recent such nooks include April to charge two senior exec- our business attracts employees the first five-star hotel achievement.” within the company. The EU space travel – a company aim- utives of PokerStars, which and the island helps us retain What resources the govern- has said the rule breached its ing to offer customers a week in runs online poker rooms, with them.” Continued on Page 3 A lack of grand homes keeps millionaires away

Take the little mountain biggest construction compa- over £115,000 annually) has lost some high net worth above Douglas Bay, built on Property railway up Snaefell – the nies, which boasts 400 been hampered by lack of individuals because they a brownfield site. Isle of Man’s highest peak employees. grand houses. have not been able to see a The developers used Strict planning at 620m above sea level – But Mr Nugent says strict He says: “Planning is con- building and move in.” Manx stone but also plenty controls have led and on a clear day you have planning controls and servative. It is a beautiful However, the government of wood and glass and a a sweeping view from the lengthy delays – all develop- island and people are sensi- has launched a review of green roof, a rare design on to a housing hills of Ulster and Scotland ments must be approved by tive to what goes up.” planning to see if regula- an island still wedded to shortage, says to the Lake District of Eng- central government – have Tony Brown, chief minis- tions can be eased. Its brick terraces and farm cot- land with little but sea and led to a shortage of houses. ter, says it is a price worth development plan allows for tages. The usual million- Andrew Bounds grass between. “We have had high popu- paying to preserve the an expansion of the popula- aires’ requirements of The island may be small lation growth and not much island’s heritage. tion from 80,000 to 100,000. swimming pools and games but it is not crowded. Just 2 building...little has been “Our responsibility is to David Kay, of Kay Associ- rooms are standard. per cent of its land mass is done to relieve that situa- the island as a whole. There ates, a Douglas architec- Mr Nugent says a prop- Four £1m­plus homes on the cliffs above Douglas Bay developed, mostly around tion. No land has been are places where you can tural practice, says things erty shortage, combined the coast. zoned for development have a reasonably sized are changing slowly and the with low unemployment the UK and Ireland. guard.” And hopes for “It is one of the least since 1976.” development in certain challenge is to work with and strong growth, has He says people will con- house sales are buoyant. densely populated countries Mr Nugent says a recent areas of the countryside. communities. pushed prices up by 375 per tinue to move to the island, “In the past eight weeks, we in Europe,” says Seamus drive to attract wealthy But we need restrictions on The company has finished cent since 1997. They have “The quality of life is great sold two houses for a com- Nugent, chief executive of expatriates to the island (by the countryside. a development of four £1m- now hit a plateau, but here with low crime . . . I do bined £6m.” Dandara, one of the island’s scrapping tax on income “It is true that we have plus homes on the cliffs prices have not fallen as in not employ a single security 2 ★ FINANCIAL TIMES TUESDAY MAY 17 2011 Doing Business in Isle of Man Expanding Healthy dose of pragmatism range of helped weather expertise the downturn They don’t overreact. They Comment are quite pragmatic. They BRIAN GROOM size up the challenge, figure out what needs to The assertion that the Isle happen and then crack on wins clients of Man is the fifth most without much drama.” likely nation to plant its That certainly flag on the moon denotes a characterised its response their 2008 peak of $57bn, but on place that is not lacking in to the biggest challenge Financial services an upward trend. ambition. thrown up by the financial Now the government, along Characteristically, it was crisis, when the UK The sector continues to with the industry, is devising a a space industry analyst government in 2008 froze focus on attracting three- to five-year marketing that made that calculation the assets of Kaupthing, strategy, made easier by the fact last year, rather than the Icelandic bank, business from abroad, finance is now grouped with other anyone on the island. including deposits held writes Brian Groom industries in a single Department Boastfulness does not come through its Isle of Man of Economic Development. naturally to Manx people. subsidiary. The island’s “In the past, we have gone in You can expect the government moved quickly aving come through and out of markets and perhaps island to shout louder to raise compensation the global crisis in not had a clear long-term plan for about its attractions in limits, committing £193m better shape than development of them,” says Ste- future, however. of its reserves to ensure many financial ven Beevers, head of financial After 25 years of three-quarters of depositors Hcentres, the Isle of Man has its services at the department. unbroken growth, the Isle were rapidly paid back. sights on the next challenge: win- One strand is a country-by- of Man has come through The same calmness was ning its share of the increasing country analysis, recognising that the financial crisis and in evidence in 2009, when wealth and corporate business in markets such as China, India and global recession in better the UK Treasury rewrote emerging markets, particularly in the Middle East have differing shape than many offshore the “common purse” Asia and the Middle East. needs. Another is an emphasis on centres – not to mention agreement that determines Financial services make up 38 “solutions rather than products” – Anne Craine: believes the skills the financial sector develops spill into other parts of the economy bigger countries – but it how revenues from value per cent of gross domestic product an effort to harness the island’s knows it faces stiffening added tax are shared, and employ a quarter of the work- diversity by offering a wider saw deposits rise 10 per cent last £1.2bn premium income, which The fund management and global competition. cutting government income ing population. The sector’s share range of services. year. “Revenues and profits are insures risks for parents such as administration industry, which “It’s had a fantastic by about £140m a year. of GDP is down from 45 per cent a For individuals, this can include growing,” says Simon Scott, man- National Grid, Centrica and employs up to 1,000, expanded record of unbroken growth. The Manx government few years ago, but that is because advising on succession planning aging director on the island, who Cathay Pacific. rapidly before the crisis and is But, like any micro- has cut spending, squeezed other industries have expanded. and managing aircraft and yachts; attributes the rise to a flight to It has been squeezed by an still seen as a growth prospect. economy, it wouldn’t take items such as mortgage There are still healthy growth for companies, it can be anything strong brands coupled with offer- eight-year soft market for com- The industry and the government a lot to knock it off its interest relief and raised prospects, as long as it continues from setting up an international ing the right investment products. mercial insurance, but, says recently completed a strategic perch,” says John Coyle, taxes, although the top to innovate. holding company to collecting Barclays, which employs 800 on Gaynor Brough, managing direc- review. president of the Bankers’ income tax rate still “It’s not just economically royalties or running pension the island – a quadrupling over 15 tor of Aon (Isle of Man) and chair- “We will continue to attract Association. remains low at 20 per cent. important to the Isle of Man, it schemes. years – has created nearly 50 jobs person of the Isle of Man Captive early-stage and midsized fund The island needs to The island continues to creates great job opportunities for The island’s banking sector has in the past year. Association, the number of new managers and start-ups and will continue to widen its base respond co-operatively to people who perhaps would have come through the collapse of captives is up by 4 per cent last continue to attract hedge fund of expertise, market itself pressures on tax havens had to leave the island 30 or 40 Kaupthing Singer & Friedlander year. Captives are branching out administrator groups into the coherently and claim its from the European Union, years ago,” says Anne Craine, (Isle of Man), the local branch of ‘My sense is that from property-related business island,” says Brian Donegan of share of the market for the International Monetary treasury minister. “There is a the failed Icelandic bank, in 2008, we are well positioned into areas such as trade credit, the Department of Economic managing the growing Fund and the Organisation spin-off, as skills that the sector without any wider loss of confi- employee benefits and, poten- Development. The strategy in- wealth in Asia, the Middle for Economic Co-operation develops can go across into other dence. It has been painful for for the expected tially, pensions. volves promotions in the City of East and Latin America. and Development. parts of the economy as well.” depositors, but the Manx govern- upswing in Banking employs about 3,000 London, stressing the island’s rel- It is the economy’s The main pillars are banking, ment acted quickly by paying out and insurance 2,200, while the atively low costs and skills base. diversity, for an island of John Coyle: insurance, the fiduciary sector up to £50,000 per customer, later interest rates over time’ fiduciary sector appears bigger Another bright prospect is pen- 80,000 people, that has ‘It wouldn’t (trust and corporate service pro- levied from banks under the than previously thought: a survey sions, boosted not only by the helped it come though the take a lot to viders) and investment fund man- depositors’ compensation scheme. by the Association of Corporate UK’s cap on tax-free contributions downturn with a slowdown knock the agement and administration, plus Bank earnings have been held The life assurance sector, which Service Providers puts employ- but more widely by the island’s rather than a recession. economy off a growing niche in pensions back by low interest rates. But, includes names such as Zurich, ment at about 1,900. The island’s expertise in international pen- That did not come about its perch’ administration. says John Coyle, chief executive Axa and Friends Provident, has 200 licensed trust and corporate sions for individuals and multina- by accident. The Isle of The island has been far from of Standard Bank on the island been a big strength in recent service providers handle business tional companies. “It is a sector Man has painstakingly immune from the financial crisis, and president of the Isle of Man years and is ahead of the game in from family trusts to vehicles for that has the ability to grow signif- built niches in such areas Its latest moves are to but it is turning the corner. Bankers’ Association: “My sense terms of expanding into emerging owning yachts and aircraft. icantly,” says Stuart Clifford of as e-commerce, e-gaming, begin automatic exchange Bank deposits, down from £57bn is that we are well positioned for markets. Companies already have There was a lean period, but Baker Tilly and chairman of the web hosting, filmmaking, of tax information from in 2008, have stabilised at £50bn. the expected upswing in interest a big market selling products to Phillip Dearden, managing direc- newly formed Association of Pen- and registering aircraft and July, ahead of other The life assurance sector’s pre- rates over time. I think we will expatriate workers in places such tor of PKF and chairman of the sion Scheme Providers. ships to broaden its base centres, and withdraw anti- mium income leapt by nearly half start to see earnings recovering, as Dubai, Abu Dhabi, Singapore Association of Corporate Service The island will be promoting its and avoid over-reliance on avoidance rules that the last year to £8.5bn, not far below but that’s probably for 2012.” and Hong Kong. Providers, says: “I don’t think “three Cs”: capability, capacity financial services. EU feared amounted to the 2006 peak of £9.4bn. At $38bn, Some banks are growing. Bar- The island also has a stable cap- there was a reduction in activity and cost. It has space for growth, Space is the most eye- harmful tax competition. the investment sector’s funds clays Wealth, which runs a global tive insurance sector, with £6bn at all. I think there was a reduc- lower costs than some competi- catching. The island hosts Now it is setting out to under management are below operations hub from the territory, of funds under management and tion in the pace of increase.” tors and ever-expanding expertise. a dozen aerospace market itself more businesses in areas such as effectively round the world, space tourism and satellite helped by the creation of communications. That an economic development moonshot may come “superministry” that for thanks to the Odyssey the first time groups 19 Moon team, competing for sectors, including all parts Enjoy private life with community spirit a global prize to devise a of financial services. landing craft capable of Delegations and transmitting pictures. It is conferences are planned, 95 per cent exported to the motorbike races. They with low income taxes, no There is fabulous scenery the finest restaurants. a 50 to 1 shot, behind the with the potential for Personal View UK. There are also helped our business as capital gains tax nor – mountains, glens and The cost of living is US, Russia, China and creating overseas offices in EDDIE DAVIES facilities in Chester, they attract engineering inheritance tax. This aids beaches. There is higher than the mainland, India. future. Brussels, Moscow, Hong people who were a source recruitment. As a rule, you wholesome local produce with travel off the island Underlying it all are the Some think the island I came to live on the Isle Kong and Guangzhou, a of recruitment for us both gain about 20 per cent such as the renowned by boat or aeroplane island’s attractions, not could have been quicker of Man in 1984 for purely total of 1,000 employees locally and internationally. more disposable income Loaghtan lamb and small readily available but just its low taxes, but also off the mark to seize the commercial reasons. I soon and some 300 patents. The government is moving to the island on scallops known as expensive, though this is proximity to the City of opportunity created by the found it to be an ideal My partner retired, and supportive of business. the same salary. queenies, as well as the mitigated by the taxation London – through which it eastward shift in global place to live and do in 2000 and we made a Strix helped reduce As big a selling point, it famed Manx kippers. advantages. wins much business and to wealth, but it believes business. partial exit with HSBC and unemployment, with plants is a wonderful place to All of this has The weather is similar to which it contributes capital getting the strategy right I came to the island to a full exit in 2005 with in both the north and the bring up children, with contributed to a friendly the UK but better than flows – along with its is more important than join my partner’s business. ABN Amro. south of the island, and environment in which to north-west England, where pragmatic regulation and first-mover advantage. I met my wife Sue here I now oversee the family the government helped ‘The island is live, do business and I grew up, because the widening spread of The government is and both my children by a business, focusing on with finance. Strix was bathed by the attract the kind of staff island is bathed by the professional knowhow. creating a plan that treats previous marriage live and philanthropy and private ideal for the island: high Gulf Stream; required to operate a Gulf Stream; we have palm It is bigger than some each country individually, work here. equity investments. Our volume, small components we have world-leading business. trees in our garden. competitor jurisdictions, recognising that products I arrived from corporate best-known investment is with high added value and palm trees in You can live privately They say you should giving room for growth and services that work in life in a UK midsized in Bolton Wanderers, but low energy consumption our garden’ yet enjoy a place with a move when coming back and keeping costs down. one market, such as India, multinational, where I held my wife’s achievements in with little effluent. huge community spirit. no longer excites you. Sue The other side of the might not suit others such positions in engineering, sport far outclass mine. Being a private company, You do need to leave the and I travel overseas Manx people’s lack of as China, Singapore and production, finance and Her horses have won gold our results were not little in the way of crime island periodically to considerably but always boastfulness is a quiet Abu Dhabi. overseas projects, notably medals at the World available to our or drugs, lack of congested recharge your batteries look forward to coming determination that has Its competitors are in Brazil. Equestrian Games and the competitors, which assisted roads, superb public and and enjoy better weather, back. helped them through the targeting these areas too. We built a business European Equestrian with our penetration and private education and shopping, sports and other storms. “The industry here But, as Andrew Corlett, called Strix (see story Games, and a bronze medal growth of the world health services, and pleasures not available on Eddie Davies is a and the people are quite managing director of law below) to £100m a year at the Beijing Olympics, all market. There is zero abundant sporting an island (such as businessman, with a resilient,” says Greg firm Cains, puts it: “We turnover. It makes controls with the British Eventing corporation tax for opportunities such as golf attending Premier League background in engineering, Ellison, chief executive of are a relatively small place for water heating Team, ridden by Mary manufacturers. and sailing. This year, the football games). originally from the UK Boston Group, a family and it’s a big world out appliances, notably kettles, King. The government also island is host to the And, of course, a mainland, who has been office and corporate service there, so we only need to and has a world market The Isle of Man is still supports individuals. The Commonwealth Youth population of 80,000 based on the island for provider. “They are used to assist a small element of share of 70 per cent, with renowned for its TT island is an offshore centre Games. simply cannot support many years dealing with challenges. that to secure our future.”

Contributors Heating controls group is boiling over with clever ideas Andrew Bounds North of England Correspondent You don’t often find a business of a market of some 70m units ideas have entered the pipeline water to different temperatures: outsourced technology Company profile executive hunched over the annually. and eight have got through,” Japanese green tea, for company. Brands have stepped Brian Groom Strix ironing board on a Thursday “Strix has prospered with one he says. They all rely on example, should be infused at back from an R&D function UK Business and Employment afternoon, but Mark Finnie is product centre – kettle Strix’s expertise in boiling 85 degrees, coffee at about 90. because of the costs. They rely Editor not catching up on domestic controls. You cannot grow There are devices that can on Strix to provide the A commitment to Adam Jezard chores: he is doing his job. beyond a certain share [of the dispense a single cup of boiling technology,” says Mr Hussey. Commissioning Editor research has made Mr Finnie, marketing director market]: it gets water or a latte, or that can In 2009, 3 per cent of revenue the thermostat expert of Strix, a thermostat specialist disproportionately expensive. heat the amount of water put came from products developed Steven Bird and the world’s leading maker “The culture of the company in them and dispense it. in the past five years; by 2010, Designer a world leader, of kettle controls, is has been research and The “most disruptive”, says it was 8.1 per cent. The target says Andrew Bounds demonstrating the group’s development. We unleashed Mr Hussey, is a unit that will for 2013 is 26 per cent. Andy Mears latest product. that and the results were boil water in just a few Turnover, which has grown Picture Editor He pushes a lever, tugs the extraordinary.” seconds. It could be used by almost 20 per cent over the iron from its holder and, Strix, founded on the island airlines so they no longer need past two years, should have hit For advertising details, through plumes of steam, in the mid-1980s, has decided to ‘In the past two years, to keep hot water in aircraft £100m by then. contact: reveals an iron freed from its stick with small domestic 120 ideas have galleys for long periods. About 200 staff are on the Charles Blandford on: electrical cord. “This is a world appliances, where it has The cost of the new devices Isle of Man, including about 85 +44 (0)3858 6252 8885; first,” he says. “No one has expertise. entered the pipeline will not be prohibitive to in R&D, and another 800-900 e­mail: managed to do this before: a There are three rules for new and eight have consumers, he says. “You can around the world, with the [email protected] cordless iron that still steams.” ideas, Mr Hussey says: the get a kettle for anything from bulk in China, where the or your usual representative The iron contains a tiny product category must be big got through’ £5-£150 and this fits in the controls are made. boiler unit devised by Strix, enough; it must offer good Paul Hussey, upper end of the quadrant but Mr Hussey says the All FT Reports are available and will steam for 30 seconds margins; and the innovation Chief executive not beyond it.” company’s “brains” remain on on FT.com. before needing to be replaced must be capable of being The one-cup dispenser is the island because its Go to: www.ft.com/reports on its pad. protected by intellectual already available from Breville, intellectual property is Paul Hussey, chief executive, property law. With 120m steam water and the control of steam. and Strix is working with other protected there, it is easy to Follow us on twitter at said the privately held business irons sold annually, the first Its product range includes brands to get more products bring in staff and the www.twitter.com/ft.reports had to move beyond kettles, criterion is certainly met. controllers for a traditional- into the shops this year. government “understands how where it has about two-thirds “In the past two years, 120 looking kettle that will heat “Strix is becoming an to do business”. FINANCIAL TIMES TUESDAY MAY 17 2011 ★ 3 Doing Business in Isle of Man Diverse industries Zero event are key to future

Continued from Page 1 company that provides helps island competition to the private- to the island by auctioning equity owned Manx Tele- its second casino licence. com under the Sure brand. The first, issued in the Since it arrived in 2007, the 1960s, is used by the four- cost of both mobile owner- to clean up star Palace hotel on Doug- ship and broadband has las’s seafront. The second fallen 70 per cent. would aim to bring in an The company says that ground for technology. international brand to lure financial services, e-gaming Green technology Ecolve, a start-up electric-bike “junket” gamblers. How- and e-commerce are driving manufacturer, is raising finance ever, Tynwald, the parlia- data volumes up “exponen- Electric and low­carbon to build a plant on the island that ment, has yet to authorise tially”. bike races are helping could produce 500 units a year. the move. The shipping and aircraft Another company with TT There are challenges. registers continue to grow, stimulate progress, heritage is Bladon Jets, which last Inflation, which generally bringing in work for corpo- says Andrew Bounds year saw its gas-powered turbine tracks the UK at a slightly rate service providers in engine debut in Jaguar’s C-X75. higher rate, hit 6.7 per cent buying craft, insuring and The company, founded by broth- in March on the retail managing them. he petrol-fuelled fiesta of ers and TT competitors Paul and price index measure and Dick Welsh, director of the TT remains the Isle of Chris Bladon, started working on fuel cost rises are causing the ship registry, says the Man’s biggest interna- engines for conventional bikes. pressure. introduction of an annual tional brand. Colin Knive- Tata, the Indian conglomerate The construction industry £730 fee has not deterred Tton, chief executive of the Depart- that owns Jaguar, was impressed is in the doldrums, while trade. Tonnage registered ment of Economic Development, enough by the technology to take consumer-facing businesses has grown to 12.4m, says the week-long June event a minority stake in the business. have fared badly. High against 11m a year ago, still has untapped potential. The turbine, based on an air- streets, many of which just behind older registers A recent survey showed it came craft design but about the size of are stuck in a 1980s time- such as Germany and the top when people were asked what a shoebox, would not power a car, warp, are studded with US. the island was associated with. as bigger turbines did in experi- empty shops as traders The island is on the “We are still not fully apprecia- mental models in 1960s, but can struggle. white list of Paris and tive of the value we get from the top up its batteries so it can go Anne Craine, treasury Tokyo, the main interna- TT,” he says. “Even after a cen- further between recharges. minister, says the govern- tional standards, and its tury, it is going from strength to Courtenay Heading, develop- ment has put aside £8m to quality is recognised by US strength. People have board meet- ment director at Bladon Jets, said regenerate retail areas. customs. ings over here during the TT.” its advantage is its small size and On the plus side, a survey Brian Johnson, director of There is television coverage of light weight. Bladon’s break- of business leaders shows civil aviation, says the the race in more than 60 countries through was to find a way to Green machine: the winning bike in the 2010 TTZero contest, designed by US company MotoCzysz confidence is high, with recession has not dented and TT3D: Closer to the Edge, machine the fine parts at such a eight out of 10 companies the commercial jet busi- which takes a camera on a bike small scale. “We see it as a range eral carbon-trading companies renewable energy. polled expecting to make a ness. In its fourth full year round the 38-mile course on the extender,” he said. and more than 50 in the clean- “For us to develop offshore profit in 2011 and more than the register has grown by island’s mountainous roads, could He said the island has been very tech sector overall, with eight wind we need to have export three-quarters expecting to 120, one more than the year win over more devotees. supportive. “We have raised listed on London’s Alternative demand,” he says, since the island grow, with half forecasting before. “We have done 365 The government, which runs almost £1m on the island. People Investment Market. cannot risk building too much more staff recruitment. aircraft in four years. I the “Tourist Trophy” race, is now hear about you and ask you to It is also seeking ways to use capacity for itself, as there are One is Cable & Wireless, think it’s amazing,” says Mr boosting corporate hospitality at come and see them, and if they renewable energy, with a target of days when the wind does not the UK telecommunications Johnson. the event and for the Manx Grand trust you and believe in the prod- 15 per cent of electricity by 2015. blow. Prix later in the year. uct, they’ll invest.” The territory is heavily dependent It is negotiating with both Isle of Man national income by economic activity Yet another race could be as The company is also working on on imported oil and gas and has Britain and Ireland about some of 2008–09 (%) important to the island’s future. a boiler that would create heat been hit by rising prices. It is the generated energy being That is the TT Zero, during which and power for the Indian market. served by a two-way subsea elec- counted towards their reduction Information and bikes powered by engines produc- Links with the island are tricity cable to the UK and an targets. communication technology ing zero carbon emissions take on strong. Paul Bladon died of cancer interconnector on the Scotland- The UK is developing two large Banking the same circuit. There is less in 2008 and a trophy in his honour Ireland gas pipeline. fields just outside the island’s ter- Medical, health noise but the speeds remain is presented at the Manx Grand Ken Milne, head of energy pol- ritorial waters. The waters are 15.6 10.0 and education impressive. Prix. icy at the Department of Eco- shallow, so offer stable siting for 7. 9 MotoCzysz, winner of the 2010 The island’s transport depart- nomic Development, says one 20- turbines. “It reduces the length of Construction 5.5 contest, is an electrical drive train ment is exploring a different tech- megawatt-capacity wind farm, for cables you require. Two gigawatts Other financial and 5.0 specialist from the US and set a nology. It has teamed up with The island is also which expressions of interest are would be possible,” says Mr business services Retail 29.2 lap record of 96.8mph and a top ITM Power, a UK company, to test home to several being invited, will be enough to Milne. speed of 135mph. “We are con- hydrogen-powered vehicles. It will hit the target. The Manx Electricity Authority Manufacturing 4.6 vinced we will see the first take delivery of two converted carbon­trading The island’s gas-fired power is state-owned and vertically inte- 100mph lap by an electric or zero- vans and a mobile liquid hydro- companies and more station has 87MW capacity and its grated so it can also test technol- 18.1 Public carbon bike this year,” says Mr gen filling station. On a small energy-from-waste plant 5MW. ogy such as tidal power, says Mr administration 4.1 Kniveton. island of 572 sq km, such technol- than 50 in the clean­ But the big prize is offshore Milne. “We have been a test bed Others Many companies and universi- ogies should be easily adopted. wind, where the island hopes it before; 3G mobile was trialled ties use the race as a testing The island is also home to sev- tech sector overall can help meet the UK’s targets for here before its use in the UK.” Source: Isle of Man Treasury 4 ★ FINANCIAL TIMES TUESDAY MAY 17 2011 Doing Business in Isle of Man A viewpoint that goes far beyond the island’s shores

any other jurisdiction, with Professional services about three-quarters of Indian companies listed on Aim incor- Brian Groom explains porated on the island. why companies are That work has dried up since 2008, but shows signs of revival. looking at global Cains managed about £1.5bn of markets and the skills listings business globally in the final quarter of last year, includ- needed to target them ing Singapore and Frankfurt. Restructuring and corporate The Isle of Man’s professional work kept coming in. services community is playing a Mr Corlett says Cains experi- pivotal role in its economic enced a bit of a dip, but reve- diversification. Having grown to nues for the first nine months of assist financial services, its this financial year were up by 14 expertise helps build such per cent on the previous year. industries as manufacturing, Its staff has doubled to 100 in web-hosting, e-commerce and the past 10 years and it expects satellites. to hire another 10 this year. As with other sectors, it has The biggest recent event in seen a slowdown during the glo- the legal world was the arrival bal recession, but Anne Craine, of Appleby, the world’s largest treasury minister, hopes and offshore law firm in terms of expects it will continue to grow. partners, via a merger with “I am married to a chartered Dickinson Cruickshank, an Isle accountant and my son is a law- of Man firm. The addition of a yer,” she adds. global name is seen by many as Legal and accountancy firms enhancing the island’s profile. have plenty to do servicing the Sean Dowling, Appleby’s man- financial community and other aging partner on the island, parts of the economy, but many says he and former Dickinson are looking globally. The same Cruickshank colleagues opted is true of the regulated profes- for a link because there were sions working for corporate limits to the ability of a stand- service providers and trust com- alone jurisdiction to service an panies: historically UK-focused international client base. Since Grate success: the Isle of Man Creamery sells about 650 tonnes of premium cheese globally, with strong markets in the UK, Ireland and Spain but increasingly international. then, as part of a larger group, They sell the island’s advan- tages, including relative proxim- Andrew Corlett: ity to the City of London, a legal ‘The island’s system similar to the UK’s and best model High costs present a challenge tax neutrality within a stable, would be as a well-regulated jurisdiction. moon around a “It’s got much more sophisti- larger body such the best watches in the world and I Steve Mitchell, wholesale manager, The creamery has pursued a similar cated,” says Phillip Dearden, as the City’ Island products wanted to revive that tradition.” says costs are a fifth higher on the approach. A co-operative founded in 1934 managing director of PKF, an He had government grants for the island, wiping out much of the profit and still owned by the island’s dairy accountancy and fiduciary busi- they have quoted for business Quality goods are made workshop and benefits from the zero cor- margin. “It costs £63 a [9 gallon] tub farmers, it was transformed when Find- ness, and chairman of the Asso- that, previously, they would not here, but state aid and poration tax. He also has four customers minimum and I struggle to sell it for lay Macleod, an Irishman, was brought ciation of Corporate Service Pro- have been able to compete for. on the island. more than £61 or £62.” in as chief executive a decade ago. viders. “The increasing burden All the big four accountancy foreign markets are essential, CVI Melles Griot, a maker of optics and The company is buying volume at cost The island produces 25m litres of milk of regulation, an increasingly firms are represented on the writes Andrew Bounds lasers for the aerospace industry, is to keep the mash tuns full. Some 40 per a year. That supplies the 7.5m of liquid litigious world and increasingly island, along with others such another business responding to increased cent of production is sold to the UK and milk needed to make 2,000 tonnes of aggressive tax enforcement as Moore Stephens, which also demand. The company, now US-owned, is it has opened four pubs there to stimu- cheese a year, with just 300 tonnes of it agencies mean everybody has to has fiduciary, yachting services rom award-winning beers and staying in its building on a housing late demand. However, it does have com- eaten on the island. be better at what they do.” and international pensions busi- cheeses to watches and lenses to estate in Onchan and investing £500,000 petitive advantages. The island has a Faced with this cheese mountain, Mr The trend is towards larger nesses. Clive Dixon, managing take pictures of Mars, the Isle of in a new coating facility. Helmut Kessler, Macleod chose to invest in production firms, able to absorb overheads partner, underlines the co-opera- Man has a wide variety of prod- managing director, says: “It is in facilities to mature and package cheese and more complicated arrange- tion not only between the public Fucts. What they all have in common is response to demand. Orders are growing Isle of Man Bank granted a on site. Isle of Man Bank granted a loan ments for clients. and private sector but also support from the government and a need by 5-15 per cent a year.” loan of about £1m secured of about £1m secured against the stocks Cains, one of the island’s larg- between firms. to export to survive. CVI supplies components for Nasa and of cheese, and was repaid partly from est law firms, which has been in “No one company can do it Roger Smith, a British watchmaker, other space agencies, including camera against the stocks of sales, showing that innovative finance is business for more than 100 all,” he says. “We are all quite arrived on the island in 1998 to train parts that enabled the Mars lander to cheese, showing innovative not confined to the offshore sector. years, won a Queen’s Award for small companies here. Often, we with George Davies, a famed horologist. send back pictures of snow. Demand is “Our job is to move as much of that export two years ago for corpo- will go into a presentation to a Mr Davies invented the coaxial escape- growing, as ever more powerful lasers finance is not confined to cheese as possible from the commodity rate work in emerging markets client along with the other serv- ment, which improves watches’ time- are being used, for example, in cutting market to the premium market, and we in eastern Europe and Asia, ice providers involved.” keeping, and was adopted by Omega, the the digits on BlackBerry keypads. the offshore sector have been successful in the past few which account for more than 40 Greg Ellison, former head of Swiss manufacturer. Power bills, wages and transport costs years,” says Mr Macleod. per cent of its business, using Barclays Wealth on the island, Mr Smith decided to go it alone and are higher on the island, but are more Some 650 tonnes of annual sales are London as a gateway. moved recently to be chief exec- created his own watches, which show off than offset by low staff turnover and German-style beer purity law dating now premium, which can fetch four “To a certain extent, I see utive of Boston Group, a family the mechanism. He sold them for £12,000 government support, says Mr Kessler. from 1874, saying only water, yeast, malt, times the commodity price. UK super- what we are doing as the future office and corporate service pro- a piece. “It only just covered my salary,” Higher bills are a bigger challenge for hops and sugar can be used to make it, markets Wm Morrison and Tesco have of places such as the Isle of vider aiming at Asia and the he recalls. His new series two costs two other local businesses, Okells Brew- ruling out rice or other sources of carbo- stocked the brand. It sells in Ireland and Man,” says Andrew Corlett, Middle East, as well as non- £72,000 apiece and already has an 18- ery, established in 1850, and the Isle of hydrate some brewers use to save 80 tonnes of premium cheese annually Cains’ managing director. “I domiciled UK residents. month waiting list. Man Creamery. Both are both looking money. goes to Spain. Half the company’s £14m think the island’s best macro “To date, many of the profes- His four-strong team makes just 10 a abroad for growth. “That provenance and quality is a turnover comes from outside the island. model would be to be seen as a sional services firms have been year at a small workshop extension to Mike Cowbourne, head brewer of unique selling point,” says Mr Mitchell. Again, provenance is important, with moon around a larger celestial fishing in the UK for opportuni- his seaside cottage near Ballaugh on the Okells, says demand for its flagship When Okells developed a wheat beer, all the milk coming from the island’s body like the City [of London].” ties. I think we have to break western coast of the island. bitter and mild has fallen from 18,000 parliament had to amend the law to 6,000 head of cattle. Cains built a reputation as that dependence and focus on Everything is assembled by hand once 36-gallon barrels in 1980 to about 6,000 in allow it. The creamery employs 90 people as legal adviser to companies from opportunities further afield,” Mr the pieces are machined on site, and buy- 2010. Its brewery, built in the 1990s, Domestically, it also has to compete well as helping the island’s balance of Russia, India and China coming Ellison says. As the Isle of Man ers can customise the face. “The last installed a lager production line built to with Bushy’s, a recent start-up. Mr Cow- payments. “Not only are we earning to list in London: the Isle of shifts its focus to emerging mar- English watchmaker closed in the 1970s,” brew Labatt’s under licence but the prod- bourne has responded by creating a abroad, but we are keeping out imports,” Man became a bigger host of kets, professional services will says Mr Smith. “England used to have uct did not take off. series of award-winning special brews. says Mr Macleod. non-UK Aim 100 companies than have a vital role to play. Specialist offers chance of a jackpot

Man represented the most Profile forward-looking and one of 188Bet the more robust regulatory regimes,” he says. Online gambling is 188Bet is predominantly a sports bookmaker, one of the most handling mainly football promising sectors, betting though it also offers basketball, tennis, says Brian Groom golf and some casino products. It employs 34 staff on the island, six Andy Scott, chief executive in the UK, and is of 188Bet, says his supported by a further 700 company aims to be the in partner companies in “world’s best-loved sports Manila and Taiwan that book”. handle trading support, The in-play betting customer services, specialist is one of a clutch compliance and IT support. E­gambling: one of 188Bet’s real sports fans – wannabe up. Because 188Bet does not of businesses that have Mr Scott says turnover challenges is to develop managers who feel they operate there, it has been turned online gambling has doubled every year products that respond to know the game and can unaffected by the US into one of the Isle of and is forecast to grow by market changes predict what’s going to authorities’ crackdown on Man’s most promising 70 per cent this year. Its happen – it offers a great PokerStars, another Isle of economic activities. core markets are in Asia, opportunity,” Mr Scott Man company, Mr Scott Created in 2006, the but Europe now accounts says. says. company was set up by a for 40 per cent, including 5 The company says One of 188Bet’s half a dozen Asian per cent in the UK, where margins are low because it challenges is to develop investors who saw their it sponsors leading football offers better odds than its products that respond to future in fully licensed, and rugby teams. main competitors, achieved market changes. well-regulated betting. He explains the through low operating The new generation of They were attracted by the attraction of in-play betting costs and by carrying a lot 25- to 30-year-old gamblers regulatory standards as with reference to a Wigan of liquidity. enjoys a social element, well as its zero corporate Athletic match against It has had to move out including “contextual tax. Mr Scott, a former Arsenal last season. Odds of some markets, including betting”. Royal Signals captain, on Wigan were 9-1 to win Italy and France, either For example, Mr Scott joined two years later from at the start of the game, because of restrictive says, if Chelsea, one of its Neteller, an online but then they went two ‘For our kind of regulations or because tax betting partners, runs an payment company on the goals down with nine customers, who is levied on turnover article on its website island, where he was chief minutes to go, at which rather than profit, which saying the goalkeeper has risk officer. point the odds became tend to be real disadvantages a low-margin had a great week in “The investors had taken 150-1. They went on to win sports fans, it offers operator. training, there would be a look round various the game 3-2. Eventually Mr Scott an opportunity to bet on jurisdictions and “For our kind of a great opportunity’ would like to expand in the him maintaining a clean determined that the Isle of customers, who tend to be US if the market opened sheet.