Challenge Is to Win Global Trade
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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.