Economy 2014 Project update:

Creating the Can-Do Economy?

Chris Corlett

CEO, Department of Trade & Industry

31 March 2010

Economy 2014 Project update:

Creating the Can-Do Economy?

Chris Corlett

CEO, Department of Trade & Industry

31 March 2010

2

The Island’s economy was at a crossroads; significant economic change was possible

1970s 1980s 1990s 2000s

ACTION: Govt takes first steps to creating offshore finance centre

ACTION: Govt creates Shipping register

ACTION: Govt creates Film industry

ACTION: Govt seeking new target sectors- e-business, e.g. e-gaming- aircraft register- spacePLUS assist Financial Services- Protected Cell Companies - 0% Corporation Tax- New Company Bill

• 1.5% unemployment• IOM GDP per capita =

110% of UK• Key Primary sector =

Banking (over 20% of GDP)

ACTION: Govt launches financial assistance for manufacturing

6.1% CAGR for GDP in real terms (v. 2.1% EU)

Low point = 1982:• 12% unemployment• IOM GDP per capita

= 55% of UK

• 5%+ unemployment• IOM GDP per capita

= 75% of UK• Key Primary sector

= Tourism (20% of GDP), dwindling rapidly

?

3

To respond to this, we formed the IOM Economy 2014 Think-tank

To deliver a vision for the IOM’s economy by 2014, indicating key future primary sectors, target country markets and key factors in achieving this (tax, legislation, marketing, staff skills etc.)

Objective

Stakeholders

PUBLICChris Corlett, CEO, DTI (Facilitator)Mark Shimmin, CFO, TreasurySteve Carse, Chief Economist, TreasuryMalcolm Couch, Assessor of Tax, TreasuryJane Dellar, Dir of IOM Finance, TreasuryCarol Glover, CEO, DTL

PRIVATESteve Christian, Gasworks MediaChris Eaton, MD, ILSChris Hall, MD, Manx TelecomJerry Linehan, MD, IOM BankPaul Quirk, MD, Friends Prov Intl

Participants

FS – Assoc. of Licensed Bankers FS – Manx Insurance Assoc. FS – Assoc. of Corporate Service ProvidersFS – Manx Insurance Managers Assoc.FS – IOM Fund Management Assoc.E-Business – E-Business Consultative CommitteeE-Business – CoC IT CommitteeShipping – Shipping Assoc. Manufacturing – CoC Manufacturing CommitteeTourism – CoC Tourism Committee

Economic Development Committee of Council of Ministers

Tynwald members

4

Banking

Asset Mgt.

Fiduciary

Shipping Management

Captives ICT/e-Business

Food &

Drink

Film

Genera

l

Manufacturin

g

Financial Services Sectors Other Primary Sectors

Secondary & Public Sectors

Tourism

X

Life

Manufacturing

Engine

ering

Aviation Management

Accounting Legal Government Construction

RetailUtilities Transport Medical & Health Education Others

Agriculture & Fishing *

Leisure (Catering & Entertainment)

Space

Scope: IOM Primary Secondary Sectors

Our work was guided by the Economic Strategy approved by Tynwald

• Build a diverse economy

• Attract/retain high-growth, high-added-value activities

• Encourage existing businesses to achieve greater success

• Create a range of employment opportunities

• Stimulate development in all parts of the Island

• Plan for sustainable development, i.e. limited population growth and protection of the environment

• Build a diverse economy

• Attract/retain high-growth, high-added-value activities

• Encourage existing businesses to achieve greater success

• Create a range of employment opportunities

• Stimulate development in all parts of the Island

• Plan for sustainable development, i.e. limited population growth and protection of the environment

6

Actual & Adjusted Economic Output

Key:

Actual output = formal economic output relating solely to that sector

Real benefit = real value to the Island of business introduced by this sector to all sectors

Relative importance of sectors (2004)

20.6%

7.3%Life & pensions

Captives

6.8%

Asset Mgt

17.4%

10.4%

9.7%

6.9% 10.7%

3.4% 4.5%

Manufacturing

e-Business/ICT

Shipping

Tourism

Banking

Fiduciary

6.1%5.2%

7Opportunities

Strengths

Threats

Weaknesses

IOM SWOT analysis

• Fiscal & legislative independence enables us to create economic competitive advantage

• Good telecoms infrastructure v. competitors

• Breadth and depth of financial and professional services capability

• Potential to grow existing sectors• Potential to create new sectors that

leverage existing strengths• Build stronger linkages between

sectors to retain more added value

• International business is rationalising to a small number of business centres

• Ability of international bodies to mitigate the Island’s tax freedom

• Complacency – by Government, businesses and individuals

• Cost and availability of staff with specific skills

• Poor customer service• Lack of EU market access for financial

services• Lack of decision makers in IOM• Cost of transport, energy and housing

We developed two scenarios – Good & Bad – based on whether we succeed or fail in achieving the Can-do Economy

Nil1 to 1.25%Earnings

-2%3 to 4%Tax

-2%0.6 to 0.8%Population

-2%0.8%Jobs

-1%5 to 6%Economic growth

BADGOODProjected annual growth in real terms

Growth prospects by sector - GOOD

High-growth< ICT / E-Business >FilmShippingNEW Aircraft managementNEW Space

Medium-growthTourismManufacturingAsset ManagementFiduciary

Low-growth< Banking >Life & pensionsFood & drink

Overall:Forecast 5-6% annual growth

Growth prospects by sector - BAD

Medium growth Film

Nil to low growthFood & drink ManufacturingFiduciaryTourism < ICT / E-Business >Asset ManagementLife & pensionsShipping

Negative growth < Banking >

Overall:Forecast 1% annual decline

E-GamingNEW Aircraft managementNEW Space

Failed sectors

Opportunity: Grow the ‘clusters’

Aviation

ShippingAsset

Mgt.Captives

AccountingLegal

Space

E-Gaming

Banking

E-Money

Fiduciary

Implications for the workforce

TechnicalTechnical

ClericalClerical

Management

Professionals

TechnicalTechnical

ClericalClerical

Professionals

Jobs automated

Jobs ‘Off-shored’

From:

To:

Management

Implications for the workforce

From:

5 GCSEs

Back-office

Single task focus

Limited vocational skills & qualifications

Limited IT skills

English only

To:

A levels/degrees

Customer facing

Customer service focus requiring multi-tasking

Specific vocational qualifications required to progress

IT skills required in virtually all jobs

Multi-lingual

Summary of forecasts• Good potential to grow Manx economy 5%+ p.a.• Real risks to our economy – no room for complacency• Banking and E-Business are vital – the former because

of its size and tax; the latter because of its potential – BUT they offer widest range between Good and Bad: £100m p.a. each by 2014!

• Given this, the broader efforts to diversify the economy to minimise this risk are vital

• Opportunity for some population growth – SENSITIVE• Up-/re-skilling of the Manx workforce will be vital• Concerted public/private and X-sector efforts required to

achieve success

• Good potential to grow Manx economy 5%+ p.a.• Real risks to our economy – no room for complacency• Banking and E-Business are vital – the former because

of its size and tax; the latter because of its potential – BUT they offer widest range between Good and Bad: £100m p.a. each by 2014!

• Given this, the broader efforts to diversify the economy to minimise this risk are vital

• Opportunity for some population growth – SENSITIVE• Up-/re-skilling of the Manx workforce will be vital• Concerted public/private and X-sector efforts required to

achieve success

So how did we do?

Actual performance (to 31/3/09)Sector 1 year 6 years 2002/ 03 2008/ 09 Change

Tourist Accommodation 12.6% 93.6% 0.8% 1.1% 0.3%Information and Communication Technology 12.3% 91.5% 3.4% 4.8% 1.4%Professional Services 10.5% 78.1% 15.9% 21.1% 5.1%Insurance, Finance and other Business Services 8.8% 65.9% 17.2% 21.2% 4.0%Manufacturing 7.2% 54.7% 5.3% 6.1% 0.8%Transport and Communication inc. Shipping 6.1% 47.6% 5.6% 6.1% 0.5%Miscellaneous Services 3.3% 28.8% 3.8% 3.6% -0.2%Public Administration 3.2% 27.8% 4.4% 4.2% -0.2%Retail Distribution 2.8% 25.1% 5.8% 5.4% -0.4%Utilities 1.0% 13.9% 1.7% 1.4% -0.3%Wholesale Distribution -0.3% 6.2% 1.4% 1.1% -0.3%Catering and Entertainment 3.5% 8.7% 1.8% 1.4% -0.3%Banking -1.3% 0.4% 20.6% 15.4% -5.2%Agriculture, Forestry and Fishing -5.3% -8.9% 1.2% 0.8% -0.4%Food and Drink Production -8.0% -13.9% 1.6% 1.0% -0.6%Construction -15.4% -27.4% 9.4% 5.1% -4.3%

TOTAL 4.5% 34.6%

Growth Share of economy

PLUS growth in 2009/10 of 2.5% due to ICT (e-gaming) and Professional Services (inc. yachts, jets and space)PLUS growth in 2009/10 of 2.5% due to ICT (e-gaming) and Professional Services (inc. yachts, jets and space)

Actions to create the ‘Can-do’ economy

Actions• Increase marketing efforts off-Island,

co-ordinated between public and private sectors, to boost sales and awareness/image of IOM

• Develop a winning legislative and regulatory framework (including taxation) that give our products an advantage

• Maximise the value of Manx labour market by joint public/private funding of vocational training, maximising workforce participation and attracting skilled labour we lack

• Deliver a high-quality living and working environment that raises the quality of life for residents, stimulates inward investment and attracts quality visitors

Focused on success

Business friendly

Strength in breadth & depth

High quality

Excellent service

Flexible

Fast

Innovative

Target characteristics

Increase marketing efforts off-Island• Invested in branding IOM: resulted in Freedom to Flourish

• Invested in single PR contract and increased budget, generating £m’s in value

• Added new Business Development resources in DTI and Treasury

• Built closer public/private marketing efforts

• Enhanced IOM Finance

• Established London office

• Established business incubator

• Created new Marketing Initiatives Fund

• Created Department of Economic Development

• Invested in branding IOM: resulted in Freedom to Flourish

• Invested in single PR contract and increased budget, generating £m’s in value

• Added new Business Development resources in DTI and Treasury

• Built closer public/private marketing efforts

• Enhanced IOM Finance

• Established London office

• Established business incubator

• Created new Marketing Initiatives Fund

• Created Department of Economic Development

Develop a winning legislative and regulatory framework

• Launched the 0/10 Corporate Tax Strategy

• Launched £100,000 income tax cap to attract entrepreneurs

• Replaced Industry Board Act with Enterprise Act

• Improved company law

• Amended e-gaming legislation and grew regulatory capability to meet industry needs

• Introduced e-money legislation

• Created a corporate jet register

• Introduced a new Economic Development Fund

• Launched the 0/10 Corporate Tax Strategy

• Launched £100,000 income tax cap to attract entrepreneurs

• Replaced Industry Board Act with Enterprise Act

• Improved company law

• Amended e-gaming legislation and grew regulatory capability to meet industry needs

• Introduced e-money legislation

• Created a corporate jet register

• Introduced a new Economic Development Fund

Maximise the value of theManx labour market

• Improved work permits– Improved service so that over 75% processed in 10 working days

– Brought in reforms to remove 25% of all applications

– Improved up-to-date info to Committee to enable informed decisions

– Invested in new IT systems which will bring further benefits

• Expanded vocational training support– Increased co-operation through Sector Skills Groups

– Improved apprentice provision

– Introduced new vital courses, e.g. management, marketing

• Expanded Job Centre– Invested in new IT systems which mean new jobs are uploaded to website near

real-time

– IT suite and Job Club give more support to the unemployed

• Improved, ‘joined up’ information on the labour market

• Improved work permits– Improved service so that over 75% processed in 10 working days

– Brought in reforms to remove 25% of all applications

– Improved up-to-date info to Committee to enable informed decisions

– Invested in new IT systems which will bring further benefits

• Expanded vocational training support– Increased co-operation through Sector Skills Groups

– Improved apprentice provision

– Introduced new vital courses, e.g. management, marketing

• Expanded Job Centre– Invested in new IT systems which mean new jobs are uploaded to website near

real-time

– IT suite and Job Club give more support to the unemployed

• Improved, ‘joined up’ information on the labour market

Deliver a high-quality living and working environment

• Improved visitor infrastructure– Invested in Villa Marina to boost conference visitors

– Supported investment in visitor premises, esp. self-catering

– Promoted IOM to major hotels; Radisson SAS remain keen

• Improved leisure infrastructure– Invested in Peel Marina and Douglas Quayside

– Still hope to have major development on Douglas bus station site

• Improving Planning– Issued all-Island Plan with Southern and Eastern plans in progress

– Developing a strategy for HNWI housing

• Improved transport strategy– Incentivised reduced fares

– Restored London City link

• Improved visitor infrastructure– Invested in Villa Marina to boost conference visitors

– Supported investment in visitor premises, esp. self-catering

– Promoted IOM to major hotels; Radisson SAS remain keen

• Improved leisure infrastructure– Invested in Peel Marina and Douglas Quayside

– Still hope to have major development on Douglas bus station site

• Improving Planning– Issued all-Island Plan with Southern and Eastern plans in progress

– Developing a strategy for HNWI housing

• Improved transport strategy– Incentivised reduced fares

– Restored London City link

In short, we are building the ‘Can-Do’ Economy